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India puts a 0.4% merchant fee on UPI payments above ₹2,000 from 15 October

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By TrustList Editorial

UPI merchant payments above ₹2,000 carry a 0.4% merchant discount rate from 15 October 2026, capped at ₹300, with a flat ₹5 in some sectors and 0.02% for capital markets. Small merchants and payments up to ₹2,000 stay free.

About India puts a 0.4% merchant fee on UPI payments above ₹2,000 from 15 October

India puts a 0.4% merchant fee on UPI payments above ₹2,000 from 15 October

25 September 2026 — India is ending free merchant acceptance on the Unified Payments Interface (UPI) for larger payments. Under a framework announced by the Ministry of Finance through the Press Information Bureau on 15 September 2026, person-to-merchant UPI payments above ₹2,000 will carry a merchant discount rate (MDR) of 0.4%. The National Payments Corporation of India (NPCI), which runs UPI, has set the start date as 15 October 2026, according to BusinessToday's report of an NPCI statement on 22 September and Outlook Business's report of the Finance Minister's remarks on 25 September. The Hindu, in an opinion piece on 25 September, describes the charge as a significant cost for high-volume, thin-margin retailers.

Not yet independently verified. The rates and exemptions come from the government release of 15 September 2026, but the 15 October start date does not appear in it: it rests on two press reports, one citing NPCI and one citing the Finance Minister. We will update this item when NPCI or the Ministry publishes the date itself. We will update this when it can be confirmed, and remove this note.

The rates

According to the government's release, the framework is made under the Payment and Settlement Systems Act, 2007, after deliberation by the UPI Steering Committee:

  • Up to ₹2,000 per payment: no MDR.
  • Above ₹2,000: 0.4% of the payment, capped at ₹300 per transaction for payments of ₹75,000 and above.
  • Essential and thin-margin sectors (railways, telecommunications, insurance, fuel and agricultural inputs): a flat ₹5 per transaction above ₹2,000.
  • Capital markets (mutual funds, securities, stockbrokers and dealers): 0.02%, capped at ₹300.
  • Small merchants, including street vendors, receiving up to ₹1 lakh a month through UPI QR codes in the person-to-person-merchant category: no MDR on any payment.
  • Person-to-person transfers: free at any amount.

BusinessToday reports NPCI saying that 18% GST applies to the MDR itself, not to the payment value, and that GST-registered merchants can claim input tax credit on it.

Who pays

The MDR is a merchant cost. The government says banks have been told to ensure merchants do not pass it on to customers, and that UPI apps are prohibited from adding platform fees or hidden charges. It says the fee is shared among banks, payment service providers and UPI application providers, and that an amount equal to 5% of MDR collections goes into a fund to promote UPI among small merchants. Outlook Business reports the Finance Minister stressing that the fee is not a tax, cess or surcharge.

The government estimates the charge will apply to about 4% of merchant transactions by number. BusinessToday reported on 15 September that payments above ₹2,000 are roughly two-thirds of UPI merchant value, so businesses that take large tickets over UPI will feel it most.

Who is affected

Any business in India that accepts UPI payments above ₹2,000 and does not qualify as a small merchant: retailers of electronics and durable goods, B2B suppliers paid by UPI, software and services firms that bill Indian customers through UPI, schools, clinics and professional firms. Payment aggregators, acquiring banks and billing platforms have to apply the new pricing by 15 October.

What to do

  • Check your acquiring bank or payment aggregator's revised pricing, and whether it has applied the ₹2,000 threshold, the ₹300 cap and any sector rate correctly for your merchant category.
  • Estimate the cost from your own data: count UPI receipts above ₹2,000 over the past three months.
  • Do not add a UPI surcharge at checkout; the government says merchants may not pass MDR to customers. Review your pricing or card-versus-UPI steering instead.
  • Make sure invoices from your provider show MDR and GST separately, so the input tax credit can be claimed.
  • If you qualify as a small merchant, confirm your provider has you in the zero-MDR category before 15 October.

Sources

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