For a covered standard merchant UPI payment above ₹2,000 and below ₹75,000, calculate MDR at 0.4% of the transaction amount. For payments of ₹75,000 or more, the announced MDR is capped at ₹300 per transaction. Those rates do not apply to every UPI payment: exemptions, merchant category and payment purpose matter, and a gateway’s platform fee is a separate cost.
The Department of Financial Services FAQ gives 15 October 2026 as the framework’s effective date. This article reflects the Ministry of Finance announcement and FAQ as of 4 October 2026, before that effective date. Ministry of Finance release; Department of Financial Services FAQ.
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Calculate the MDR on a covered standard P2M payment
For a person-to-merchant (P2M) transaction covered by the standard rule, the calculation is:
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MDR = transaction amount × 0.004
This is a 0.4% rate for transactions above ₹2,000 and below ₹75,000. At ₹75,000 and above, the MDR is capped at ₹300 per transaction. The Department of Financial Services FAQ gives these examples:
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| Transaction amount | Calculation before cap | MDR under standard rule |
|---|---|---|
| ₹3,000 | ₹3,000 × 0.004 | ₹12 |
| ₹10,000 | ₹10,000 × 0.004 | ₹40 |
| ₹50,000 | ₹50,000 × 0.004 | ₹200 |
| ₹100,000 | ₹100,000 × 0.004 = ₹400 | ₹300 after the cap |
The rate, threshold and cap are from the Department of Financial Services FAQ. Apply them only after confirming that the payment and merchant fall under the standard category.
Check whether the transaction is exempt or has a special rate
Do not apply the 0.4% formula to all UPI payments. The announced framework distinguishes payment type, merchant classification and transaction purpose.
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| Payment or merchant classification | Announced treatment |
|---|---|
| P2P transfer | Zero MDR |
| Merchant P2M payment of ₹2,000 or less | Zero MDR |
| Qualifying small merchant in the P2PM category, receiving up to ₹1 lakh per month through UPI QR | Zero MDR on all transactions, including payments above ₹2,000 |
| Specified essential or thin-margin sectors, including railways, telecommunications, insurance and fuel, for payments above ₹2,000 | Flat ₹5 per transaction |
| Payments related to mutual funds, securities, stockbrokers and dealers | 0.02%, capped at ₹300 per transaction |
| Other covered standard P2M payment above ₹2,000 | 0.4%, capped at ₹300 for transactions of ₹75,000 or more |
The Ministry’s release and FAQ name the categories and rates; the acquiring bank’s assigned merchant category and transaction type determine which rule applies. Ask the bank to confirm your classification rather than assuming it from your business name or average ticket. See the Ministry of Finance release and official FAQ.
The framework concerns direct UPI payments from a user’s bank account to a merchant account. Credit-linked UPI follows separate credit-product rules, according to the FAQ.
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Estimate the full cost, not just MDR
MDR is only one possible component of your acceptance cost. A payment gateway or aggregator can separately charge a platform or service fee under its contract. Treat the announced transaction-level MDR and the provider’s fee schedule as distinct line items.
- Identify your payment flows. Separate in-person QR payments from website or app gateway payments. For each flow, establish whether it is P2P or P2M, direct bank-account-funded or credit-linked, and whether your merchant category qualifies for zero MDR or a special rate.
- Calculate framework MDR by transaction bucket. Group transactions by amount band, payment purpose and merchant category. Apply the exemption, special rate or standard formula that matches each bucket.
- Add only confirmed provider charges. Review your merchant agreement and current price schedule for platform fees, fee base, taxes, settlement terms, refunds and any other charges. Confirm offer eligibility and expiry where a promotional price is shown.
- Model a representative month. Multiply the expected number of transactions in each bucket by its applicable MDR, then add provider fees for the transactions or services they cover and other contractually confirmed charges.
- Calculate an effective rate if useful. Divide the estimated monthly UPI cost by the corresponding UPI sales volume. Use a realistic ticket-size mix; a single headline percentage can overstate costs when many transactions are exempt or capped.
Published provider pages illustrate why the second fee check matters, but they are not universal quotes. Razorpay’s UPI gateway page lists a standard 2% platform fee, says GST is applicable, and shows no one-time setup or annual maintenance fee on that plan. Cashfree’s page lists 1.95% and displays a time-limited offer for eligible new merchants; its terms say platform fees are separate from payment-instrument fees and mutually agreed. Confirm the current terms directly with the provider: Razorpay UPI gateway pricing; Cashfree payment gateway charges.
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Compare the route and contract you will actually use, rather than judging providers by one advertised percentage.
- Channel: in-person QR acceptance and a website or app gateway may have different provider terms and integration needs.
- Classification: confirm P2PM zero-MDR eligibility or any special merchant category with your acquiring bank.
- Transaction mix: model the threshold, cap and any category-specific rate against your likely ticket sizes and payment purposes.
- Provider charges: verify fee base, taxes, offer qualification and expiry in the written agreement or current schedule.
- Settlement and operations: check settlement timing, any expedited-settlement charge, refunds, reconciliation, reporting and integration requirements in the actual contract.
Public pricing pages can provide examples, but they do not establish the negotiated terms or full cost for a particular business. For in-person payments, an existing physical QR stand can continue to be used; a display stand merely helps present the QR and does not replace a provider-issued QR. The FAQ addresses existing physical stands: Department of Financial Services FAQ.
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Keep the merchant cost separate from customer pricing
The Ministry of Finance says MDR is a charge within the merchant payment ecosystem, not a charge on customers making UPI payments. It also says banks have been advised to ensure merchants do not pass MDR on to customers. Build the merchant’s cost forecast separately from customer-facing pricing; do not describe MDR as a customer UPI fee. Ministry of Finance release, 15 September 2026.
What the government’s 96% estimate means
The Ministry estimates that 96% of P2M transactions will remain unaffected and that about 4% will attract MDR under the announced framework. This is a government estimate attributed to its data analysis, not an independently measured result or a prediction of the share of your own transactions that will incur charges. Your cost depends on your transaction mix, assigned category and provider contract. Ministry of Finance release.
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