UPI Transaction Charges From 15 October 2026: Latest Update

UPI has been free for users and, for most payments, for merchants too. But after Diwali 2026, a new MDR framework starts for specified person-to-merchant (P2M) transactions.

Key Features

It follows a Finance Ministry notification in September 2026, with NPCI issuing FAQs on how it works.

• Rate: 0.4% of the transaction value
• Applies to: eligible P2M payments above ₹2,000
• Cap: ₹300 per transaction for payments of ₹75,000 and above
• Paid by: the merchant, not the customer

The government has said roughly 96% of P2M UPI transactions remain unaffected, because most payments fall at or below ₹2,000.

How It Works For Each Party?

• For Customers: Standard UPI payments (both person-to-person and person-to-merchant) remain completely free. You will never be asked to pay an extra percentage or a surcharge for scanning a QR code and paying an amount above ₹2,000.
• For Merchants: The 0.4% Merchant Discount Rate (MDR) or fixed fees are deducted directly from the business's settlement amount by their processing bank for transactions over ₹2,000.
• Rule Against Surcharges: Businesses are legally prohibited from adding platform fees or charging customers extra at checkout to cover these bank transaction costs.

How much will it cost?

What Stays Free?

• Person-to-person (P2P) transfers, whatever the amount.
• Merchant payments up to ₹2,000.
• Small merchants: eligible merchants stay on the zero-MDR framework. The NPCI FAQs, as reported, say this covers merchants receiving up to ₹1 lakh a month through UPI QR codes.
• No platform fee: UPI apps are barred from charging a platform fee on these transactions.

Special Rates Reported for Some Sectors

Railways, telecom, insurance and fuel are reported to attract a flat ₹5 per transaction in place of 0.4%. Capital-market payments are reported at a concessional 0.02% (₹300 cap), and education payments at concessional or capped rates. Treat these as reported details and check the official notification for the exact terms.

Is the Rule Being Challenged?

Yes. The Supreme Court heard a challenge on 29 September 2026. It refused to stay the framework, but asked the Centre, RBI and NPCI to respond within four weeks, and asked what the legal basis for the charge is when the government does not collect it. The Centre's position is that MDR is neither a tax nor a fee collected by the government; it is shared among participants in the payments ecosystem. 

What to watch: merchants may try to recover the cost by raising prices or adding surcharges on larger payments. The framework says the MDR is not meant to be passed on to customers as a separate UPI charge. If a merchant asks you to pay extra for using UPI, you can raise it with the payment app or your bank.

What Businesses and Professionals Should Do?

• Check whether your business falls under the zero-MDR small-merchant category with your bank or payment provider.
• Estimate the cost: ₹4 on every ₹1,000 above the ₹2,000 line, capped at ₹300 a payment.
• Review pricing and invoices for large UPI-collected payments, and record MDR as a business expense.

FAQs

Will I be charged for UPI payments from October 2026?

No. The 0.4% MDR is a merchant-side cost and is not meant to be passed to customers as a separate UPI charge.

Are UPI payments to friends and family still free?

Yes. P2P transfers remain free at any amount.

What is the UPI MDR rate and the maximum charge?

0.4% on eligible merchant payments above ₹2,000, capped at ₹300 per transaction for payments of ₹75,000 and above.

Do small shopkeepers have to pay it?

Eligible small merchants continue under zero MDR. Reports say this includes those receiving up to ₹1 lakh a month through UPI QR codes. Confirm eligibility with your bank or payment app.

Has the Supreme Court stopped the UPI MDR?

No. On 29 September 2026 the Court declined to stay it and asked the Centre, RBI and NPCI to respond within four weeks.