The government has clarified that consumers and all person-to-person UPI transactions will continue to remain free.
If introduced in future, MDR will apply only to a limited set of merchant payments above a specified threshold.
Highlights
- No transaction charge will be imposed on consumers making UPI payments.
- All person-to-person (P2P) UPI transactions will continue to remain free.
- The vast majority of merchant UPI transactions will also remain free.
- Any future MDR would apply only to a limited category of merchant transactions above a threshold.
- The proposed MDR would be nominal and significantly lower than debit or credit card MDR, the government said.
- UPI processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 and is currently live in 11 foreign countries.
New Delhi: UPI users will not have to pay transaction charges for making digital payments, the government has clarified amid concerns over proposed changes to India’s payment laws.
The Ministry of Finance categorically stated that UPI will remain free for citizens, including everyday consumer payments and all person-to-person transactions.
The clarification comes after debate over a proposed amendment to Section 10A of the Payment and Settlement Systems Act, 2007 through the Taxation and Other Laws (Amendment) Bill, 2026.
The government said the amendment should not be interpreted as the introduction of charges for ordinary UPI users. Instead, it is an enabling provision intended to create a framework for UPI’s long-term financial and technological sustainability.
However, there could be a change for some merchants in the future.
The government said that if Merchant Discount Rate, or MDR, is introduced, it would apply only to a limited set of merchant transactions above a specified threshold. It would not be imposed across all UPI merchant payments.
The rate, if introduced, would also be nominal and substantially lower than MDR charged on debit or credit card transactions, according to the Finance Ministry.
This means that the vast majority of UPI transactions are expected to remain free for merchants as well.
Once Parliament passes the proposed amendment, the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI) will decide whether an MDR should be introduced and how it would operate.
The government said the framework is needed because rapidly rising UPI volumes require continuous investment in cybersecurity, fraud prevention, infrastructure and technological upgrades. It also wants to encourage more companies to participate in the payments ecosystem.
UPI’s scale has increased dramatically since its launch. According to the government, the payment system handled a record 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone.
UPI is also currently live in 11 foreign countries, while several others have shown interest in the Indian payment system.
For ordinary users, however, the government’s message is clear: sending money to another person or making everyday UPI payments will continue to remain free.
