UPI Charges Explained: Who Pays, Who Is Exempt Under New Rules?

UPI payments above Rs 2,000 will attract a Merchant Discount Rate (MDR) from October 15, 2026, but customers will not have to pay the charge directly. The new rules are aimed at merchants, with different rates and exemptions for certain categories.

Small traders, person-to-person transfers and payments below the Rs 2,000 threshold will remain outside the standard MDR. Here is a simple breakdown of who will pay, who will be exempt and what the new rules mean for customers using UPI for everyday payments.

The standard MDR will apply to eligible merchant payments above Rs 2,000. The rate has been set at 0.4%, with a maximum charge of Rs 300 per transaction. This means a Rs 3,000 payment would attract an MDR of Rs 12, while a Rs 50,000 payment would mean Rs 200.

Importantly, customers will not have to pay this charge. If you make a Rs 3,000 UPI payment at a shop, you will still pay Rs 3,000. The MDR is a charge between the merchant and their bank. UPI payments between individuals will also remain free.

Payments of up to Rs 2,000 made to merchants will not attract MDR under the new framework. Small traders and micro-merchants can also qualify for an exemption. Merchants receiving up to Rs 1 lakh a month through UPI QR payments can be placed in the P2PM category, meaning they will not have to pay MDR.

A GST number will not be mandatory for this exemption. However, merchants who receive more than Rs 1 lakh in UPI payments for three consecutive months could be moved into the larger-merchant category. Some sectors will have separate MDR rates rather than the standard 0.4%.

Petrol pumps, telecom, insurance, railways and certain utility payments will have a fixed charge of up to Rs 5 per transaction. Payments related to mutual funds and the stock market will have an MDR of 0.02%, capped at Rs 300.

Certain auto-debit transactions will remain outside the MDR system. Under the new rules, customers can continue using UPI without paying an additional transaction fee. UPI apps will also not be allowed to impose a separate platform fee.

However, questions remain over GST on MDR, how the revenue will be shared among banks, apps and NPCI, and what action could be taken if merchants try to recover the charge from customers. Vinita Bhat is a Chief Copy Editor at ABP Live English, with experience in TV and digital journalism.

She covers geopolitics, international conflicts, global current affairs and Kashmir. For tips and queries, write to vinitab@abpnetwork.com.