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What are the UPI charge rules in India?
The Ministry of Finance’s 15 September 2026 announcement sets out selective MDR for some person-to-merchant (P2M) payments. Person-to-person (P2P) transfers remain free regardless of amount. The rates below describe the government’s announced framework; a merchant’s exact eligibility and implementation should be checked against the applicable notification and NPCI circular.
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| Payment or merchant category | Value or eligibility | Announced MDR | Who bears it under the framework? |
|---|---|---|---|
| P2P transfer | Any amount | Zero | No MDR for the payer |
| Ordinary P2M transaction | Up to ₹2,000 | Zero | No MDR for the customer |
| Qualifying small merchant receiving through UPI QR under P2PM | Up to ₹1 lakh per month in UPI QR receipts; zero-MDR treatment applies to all transactions | Zero | No MDR for the customer |
| Other qualifying P2M transaction | Above ₹2,000; transactions of ₹75,000 and above are subject to the stated cap | 0.4%, capped at ₹300 per transaction at ₹75,000 and above | Merchant-side MDR; the Ministry says it must not be passed on to customers |
| Railways, telecommunications, insurance, fuel and agricultural inputs | Above ₹2,000, for transactions in the specified categories | Flat ₹5 per transaction | Merchant-side MDR; the Ministry says it must not be passed on to customers |
| Mutual funds, securities, stockbrokers and dealers | Payments relating to these capital-market categories | 0.02%, capped at ₹300 | Merchant-side MDR; the Ministry says it must not be passed on to customers |
The Ministry says UPI application providers may not impose platform fees or hidden charges under the framework. It also says MDR is not a tax collected by the government or NPCI. The intended charge sits within the merchant-payment ecosystem, and the government says merchants must not transfer it to customers.
Daily transfer limits are risk controls, not pricing thresholds, according to the Ministry. For a merchant-specific answer, the relevant category, monthly QR receipts, transaction value and applicable NPCI circular all matter; the summary announcement alone may not settle every eligibility or implementation detail.
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Why can UPI be free to users but still cost money?
A zero fee at checkout does not make payment processing costless. Banks and other payment-system participants must support the services and infrastructure behind transactions. The available government material does not establish UPI’s actual per-transaction cost or a complete annual cost total for each participant, so no precise “cost per payment” can be inferred from the published incentive figures.
There are several different ways to talk about the price of a payment, and they should not be confused:
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- User price: the amount a person sending or receiving money is charged. P2P remains free under the announced rules.
- Merchant price: MDR on specified P2M transactions. It is a merchant-side charge, not a customer surcharge under the government’s stated framework.
- Public support: incentive payments that have helped compensate participants under earlier zero-MDR arrangements.
- Operating cost: the resources used by banks and payment providers to keep payment services running. The cited figures do not add up to a full cost audit.
The Reserve Bank of India (RBI), discussing payment-system cost regulation generally, describes the policy tension this way: “High costs will discourage consumers / merchants from shifting to digital payments, while low costs may not be remunerative and would discourage investments.” That is a useful explanation of the trade-off, not evidence that the particular MDR rates announced for UPI are optimal.
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How was the zero-MDR model supported?
In 2020, policy made MDR zero for UPI and RuPay debit-card transactions as part of an effort to encourage digital payments. The government later used incentive schemes to support ecosystem participants. For FY2024–25, it announced a ₹1,500 crore estimated outlay for incentives on low-value BHIM-UPI P2M transactions up to ₹2,000, with small merchants as the intended focus. The government said the funds would be paid to acquiring banks and shared with issuer banks, payment-service-provider banks and app providers.
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The figures below are different kinds of amounts: the first three are reported payouts for named fiscal years, the cumulative figure is government incentive support over four years, and the final row is an estimated scheme outlay—not a confirmed payout.
| Figure | What it represents | Attribution and date |
|---|---|---|
| ₹1,389 crore | FY2021–22 incentive payout | Government of India/Prime Minister’s Office, reported in 2025 |
| ₹2,210 crore | FY2022–23 incentive payout | Government of India/Prime Minister’s Office, reported in 2025 |
| ₹3,631 crore | FY2023–24 incentive payout | Government of India/Prime Minister’s Office, reported in 2025 |
| Approximately ₹8,730 crore | Total incentive support for FY2021–22 through FY2024–25 | Department of Financial Services, Lok Sabha answer in 2025 |
| ₹1,500 crore | Estimated outlay for the FY2024–25 low-value BHIM-UPI P2M incentive scheme | Government of India announcement in 2025; an approved estimate, not a reported actual payout |
The ₹8,730 crore total covers four fiscal years, while the listed annual payout figures run through FY2023–24. The FY2024–25 scheme’s estimated outlay is a separate budget figure; it does not establish how much was ultimately disbursed that year.
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How many merchant payments are affected?
The Ministry estimates that about 4% of P2M transactions will attract MDR under the framework and about 96% will remain unaffected. These are the Ministry’s estimates, not independently audited figures; the material cited with the announcement does not provide an underlying methodology or data table.
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UPI accounted for 81% of India’s retail digital payment transactions in FY2024–25, according to a Government of India report in 2026. Across all retail digital payment modes—not UPI alone—there were 22,167.90 crore transactions worth ₹849.12 lakh crore that fiscal year. Those all-mode totals illustrate the scale of digital payments but should not be mistaken for UPI transaction totals.
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Why did the policy position change after 2025?
A Lok Sabha answer dated 18 August 2025 said there was then no proposal to impose UPI transaction charges. The Finance Ministry’s 15 September 2026 announcement describes a later framework allowing MDR on specified merchant transactions. The statements refer to different dates: the 2025 answer is historical and does not describe the later policy.
The policy change also does not mean all users now pay a transaction fee. The 2026 framework keeps P2P free and retains zero-MDR treatment for the stated low-value and qualifying small-merchant cases, while permitting merchant-side charges in specified categories.
What the available figures do—and do not—show
Incentive payouts and MDR rules show how the system’s funding model has evolved, but they do not reveal its total cost or prove how the new rates will affect adoption or investment. The cited sources do not establish the actual cost of an individual UPI transaction, each stakeholder’s complete annual expenses, the realized FY2024–25 incentive payout, or the empirical price effects of selective MDR. The RBI’s cost-balancing observation is a general principle rather than a UPI-specific cost study.
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