UPI New Charges 2026: NPCI has announced a new Merchant Discount Rate (MDR) for selected UPI merchant payments. From 15 October 2026, a 0.40% MDR will apply to eligible Person-to-Merchant (P2M) UPI transactions above ₹2,000.
However, normal UPI users do not need to worry.
Customers will not have to pay this charge. Person-to-person UPI transfers will continue to be free. UPI payments up to ₹2,000 will also remain free, and eligible small merchants will continue to receive special zero-MDR protection.
NPCI says more than 95% of UPI merchant transactions by volume are ₹2,000 or below, so most everyday UPI payments will remain unaffected.
In this article, we will understand the new UPI MDR rule, who has to pay it, who is exempt, charges on different transaction amounts, small merchant rules, AutoPay, UPI apps, and other important details.
UPI MDR Charges 2026: Overview
- Rule Name: UPI Merchant Discount Rate (MDR)
- Applicable From: 15 October 2026
- Issued By: National Payments Corporation of India (NPCI)
- Applicable On: Selected Person-to-Merchant (P2M) UPI payments
- Transaction Limit: Above ₹2,000
- Normal MDR Rate: 0.40%
- Maximum MDR: ₹300 per transaction
- P2P UPI Transfer: Free
- Customer Charges: No
- UPI Payment Up To ₹2,000: Free
- Small P2PM Merchants: Zero MDR, subject to eligibility
- Official Information: NPCI and Ministry of Finance
What Is MDR in UPI?
MDR means Merchant Discount Rate.It is a small payment-processing charge paid by a merchant when accepting certain digital payments. It is not a tax on the customer.
For example, if you purchase a product for ₹3,000 and pay through UPI, the merchant may have to pay MDR according to the new rules.
The customer still pays only the actual product price.
For normal eligible commercial UPI payments above ₹2,000, the MDR rate will be 0.40%
UPI New MDR Rule From 15 October 2026
NPCI has announced that a 0.40% MDR will apply to eligible P2M UPI transactions above ₹2,000.
For transactions of ₹75,000 or more, MDR will be limited to a maximum of ₹300 per transaction.
UPI MDR Charges Example
- Payment of ₹2,000 → ₹0 MDR
- Payment of ₹3,000 → ₹12 MDR
- Payment of ₹10,000 → ₹40 MDR
- Payment of ₹50,000 → ₹200 MDR
- Payment of ₹75,000 → ₹300 MDR
- Payment of ₹1,00,000 → ₹300 MDR maximum
For example:
₹3,000 × 0.40% = ₹12
So on an eligible ₹3,000 merchant payment, the merchant may pay ₹12 as MDR.
For a ₹1,00,000 transaction, 0.40% would normally be ₹400, but because the maximum MDR is capped at ₹300, only ₹300 will apply.
Will Customers Have To Pay UPI Charges
No. This is one of the most important points.
NPCI clearly says that normal consumers will continue to use UPI without paying a transaction charge.
Customers making UPI payments should not be charged MDR separately.
So if a product costs ₹5,000, you should normally pay only: ₹5,000
The merchant should not add: ₹5,000 + 0.40% UPI charge
NPCI says merchants cannot pass the MDR directly to customers while accepting UPI payments.
Is UPI Above ₹2,000 Now Chargeable for Everyone?
No. This is where many people are getting confused.
The ₹2,000 rule does not mean every UPI transaction above ₹2,000 will have a charge. The MDR mainly applies to selected Person-to-Merchant or P2M transactions.
It does not mean that normal people sending money to another person will pay 0.40%.
UPI Person-to-Person Transfer Will Remain Free
If you send money to:
- Your friend
- Your family member
- Your brother or sister
- Your parents
- Another personal contact
- Your own second bank account
the transaction will continue to remain free.
NPCI says P2P transfers will remain free for both the sender and the receiver.
Example
You send ₹10,000 to your friend through UPI.
Charge: ₹0
You send ₹20,000 to your brother.
Charge: ₹0
You transfer ₹50,000 from your own one bank account to another through UPI.
Charge: ₹0
So you do not need to split personal transfers into smaller payments.
UPI Payments Up To ₹2,000 Will Remain Free
Merchant UPI payments of ₹2,000 or less will continue with zero MDR under the standard rule.
NPCI says more than 95% of UPI P2M transaction volume falls within this ₹2,000 limit.
This means common everyday payments such as:
- ₹20 tea payment
- ₹200 vegetable purchase
- ₹500 grocery payment
- ₹700 medicine payment
- ₹1,000 restaurant bill
- ₹1,500 shopping payment
- ₹2,000 merchant payment
will continue with zero MDR under the normal framework.
The Government has also described UPI as continuing to remain free for peer-to-peer payments and around 96% of merchant transactions.
Will Google Pay, PhonePe, Paytm or Other UPI Apps Charge Users?
According to NPCI's current FAQ, UPI app providers cannot charge a platform fee or other charge simply for making a UPI payment.
NPCI says UPI apps are restricted from charging platform fees on UPI transactions.
So this MDR announcement does not mean:
- Google Pay will charge you 0.40%
- PhonePe will charge you 0.40%
- Paytm will charge you 0.40%
- BHIM will charge you 0.40%
The MDR discussed here is a merchant-side payment-processing charge.
Small Shopkeepers and Street Vendors Will Get Zero MDR
NPCI has also protected eligible small merchants.
These merchants can fall under a category called P2PM — Person-to-Person Merchant.
According to NPCI, eligible small merchants receiving up to ₹1 lakh per month through UPI QR payments can continue with zero MDR under the P2PM framework.
This can include eligible small businesses such as:
- Small local shops
- Street vendors
- Tea stalls
- Small food sellers
- Small local service providers
- Small unorganised retailers
Is GST Registration Required for Zero MDR?
Some sectors will not use the normal 0.40% MDR rate.
NPCI says certain categories such as:
- Railways
- Telecom
- Insurance
- Fuel
and some other eligible categories can have a flat MDR of ₹5 per transaction for applicable payments above ₹2,000.
Special ₹5 MDR for Some Merchant Categories
Some sectors will not use the normal 0.40% MDR rate.
NPCI says certain categories such as:
- Railways
- Telecom
- Insurance
- Fuel
and some other eligible categories can have a flat MDR of ₹5 per transaction for applicable payments above ₹2,000.
Example
Suppose you pay an insurance premium of ₹20,000 through an eligible UPI payment.
Normal 0.40% calculation would be: ₹20,000 × 0.40% = ₹80
But under the special eligible category, the merchant-side MDR can be only: ₹5
The customer is still not supposed to pay this MDR separately.
UPI Payment at Petrol Pump
Fuel transactions are included in the special concessional category described by NPCI.
For an eligible fuel UPI transaction:
- Up to ₹2,000 → Zero MDR
- Above ₹2,000 → Flat ₹5 MDR
NPCI says this special structure is designed to avoid high payment-processing costs for petrol pump operators.
UPI Payment for Insurance
Insurance premium payments also receive the special flat-rate treatment described by NPCI.
For eligible insurance payments above ₹2,000, MDR will be ₹5 per transaction instead of the normal 0.40% rate.
Again, the MDR is on the merchant side.
UPI Charges for Mutual Funds and Stock Market Payments
Capital-market UPI transactions have a separate MDR structure.
NPCI says transactions related to:
- Mutual funds
- Securities
- Stockbrokers
- Dealers
- Eligible investment platforms
can have an MDR of 0.02% of the transaction value, with a maximum cap of ₹300.
This is much lower than the normal commercial MDR rate of 0.40%.
Why Is UPI MDR Being Introduced?
UPI processes billions of transactions and requires a very large payment infrastructure.
Banks, NPCI, payment companies and other ecosystem participants need systems for:
- Servers
- Payment processing
- Cybersecurity
- Fraud prevention
- Customer support
- Banking technology
- Network infrastructure
- System upgrades
NPCI says industry estimates put the cost of operating and supporting the UPI payment ecosystem at around ₹20,000 crore per year.
According to NPCI, MDR revenue can help support infrastructure, innovation, cybersecurity and long-term sustainability of UPI.
How Big Is UPI Today?
UPI has become one of India's most important payment systems.
According to NPCI's September 2026 FAQ, UPI processed around:
- 2,451 crore transactions
- Worth about ₹29.9 lakh crore
in August 2026 alone.
At this scale, operating UPI requires large servers, banking systems, security systems and continuous technology investment.
UPI MDR vs Credit Card Charges
NPCI says standard credit-card MDR can typically range from around 1.5% to 2.5%, while the new standard eligible UPI MDR is 0.40%.
Debit-card MDR can also be higher than the new UPI rate depending on the applicable rules.
Example
For an eligible ₹10,000 payment:
UPI MDR at 0.40% = ₹40
If a card transaction had an MDR of 2%:
Card MDR = ₹200
Actual card charges can vary, but this example shows why the new UPI MDR is still relatively low compared with many card-payment costs.
Important Points About New UPI MDR Charges
- New MDR rules start from 15 October 2026.
- Consumers will continue to use UPI without transaction charges.
- P2P UPI transfers remain free.
- Payments up to ₹2,000 remain zero MDR under the standard merchant rule.
- Eligible commercial merchant payments above ₹2,000 can attract 0.40% MDR.
- MDR is capped at ₹300 for transactions of ₹75,000 and above.
- Eligible P2PM small merchants continue to receive zero-MDR protection.
- Some sectors such as fuel and insurance have special flat-rate MDR.
- Capital-market transactions have a separate rate.
- UPI AutoPay has different treatment.
- Merchants cannot directly pass MDR to customers.
- Existing QR codes do not need to be replaced just because of the new rule.
Frequently Asked Questions – UPI New Charges 2026
1. Will UPI become chargeable from October 15, 2026?
No. Normal consumers will continue to use UPI without transaction charges. MDR applies only to selected merchant-side transactions.
2. Will I pay 0.40% if I send ₹5,000 to my friend?
No. Person-to-person UPI transfers remain free.
3. What happens if I pay ₹3,000 at a shop?
For an eligible normal P2M merchant, 0.40% MDR may apply on the merchant side. On ₹3,000, that is ₹12.
4. Does the customer pay MDR?
No. NPCI says merchants cannot pass the MDR directly to customers.
5. Are UPI payments below ₹2,000 free?
Yes. Under the standard P2M framework, transactions up to ₹2,000 remain zero MDR.
6. Are small shopkeepers exempt?
Eligible P2PM merchants receiving up to ₹1 lakh per month through UPI QR payments continue to receive zero-MDR protection.
7. Will Google Pay or PhonePe charge a platform fee?
NPCI says UPI apps cannot charge a platform fee simply for making a UPI payment.
8. What is the maximum UPI MDR?
For normal eligible commercial transactions, MDR is capped at ₹300 for payments of ₹75,000 and above.
9. Will UPI AutoPay also have 0.40% MDR?
NPCI says prescribed MDR transaction charges do not apply to recurring UPI mandates or AutoPay under this framework.
10. When will the new UPI MDR rule start?
Important Links
NPCI Official MDR FAQ: View Official NPCI PDF
Government / PIB Update: View Official Government Update
NPCI Official Website: Visit NPCI
Conclusion
The new UPI MDR rule does not mean UPI is becoming paid for normal users.
From 15 October 2026, selected merchant UPI payments above ₹2,000 will come under a new MDR structure. For normal eligible commercial P2M transactions, the MDR will be 0.40%, with a maximum charge of ₹300 for transactions of ₹75,000 and above.
However:
P2P transfers remain free.
Customers do not pay MDR.
UPI payments up to ₹2,000 remain zero MDR under the standard rule.
Eligible small P2PM merchants remain protected with zero MDR.
Therefore, if you use UPI normally for sending money to family, friends, paying local bills, shopping or scanning QR codes, you do not need to worry that 0.40% will automatically be deducted from your account.
Always check official information from NPCI, RBI or the Ministry of Finance instead of trusting social-media messages about UPI charges.