You use UPI every day for everything from splitting a bill to paying at the local store. That convenience has always come without extra cost to you. Now the system is changing. From October 15, 2026, a new set of rules introduces merchant discount rate or MDR on certain payments.
These UPI charges apply only on the merchant side. You still pay nothing when you send money or scan a QR code. The shift matters because it keeps the network running while protecting the free experience you rely on. Person-to-person transfers stay free. Small everyday purchases stay free. Only larger payments to certain merchants carry a fee that the business pays.
How the New UPI Charges Framework Works
Person-to-person transfers remain free no matter the amount. You can send money to family, friends, or your own accounts without any charge.
Person-to-merchant payments of ₹2,000 or less also carry zero MDR. Most of your daily spends fall here.
Above ₹2,000 the standard rate is 0.4 percent of the transaction value. That fee is paid by the merchant to the bank that processes the payment. For any transaction of ₹75,000 or more the MDR is capped at ₹300.
Some sectors get a flat ₹5 charge instead of the percentage. Railways, telecom, insurance, fuel, utilities, education fees, and agricultural inputs fall under this lower rate when the payment exceeds ₹2,000. Capital-market payments such as mutual fund investments or stockbroker transactions attract only 0.02 percent, also capped at ₹300.
Small merchants who receive up to ₹1 lakh a month through UPI QR codes stay completely exempt. Payments made through QR codes in rural and semi-urban areas also remain free of MDR.
Who Actually Pays the UPI Charges?
You pay nothing. No transaction fee appears on your bank statement. No UPI app can add a platform fee.
The merchant pays the MDR to the acquiring bank. Official rules state that this cost cannot be passed on to you. You pay only the price shown on the bill or screen.
Here is how the numbers work. On a ₹3,000 purchase the merchant pays ₹12. On a ₹5,000 purchase the fee is ₹20. A ₹10,000 payment costs the merchant ₹40. At ₹50,000 the MDR becomes ₹200. Once the amount reaches ₹75,000 or higher the merchant pays the fixed ceiling of ₹300 even if 0.4 percent would have been higher.
Large retailers absorb the cost as part of running their business. Neighbourhood shops and street vendors that stay under the ₹1 lakh monthly limit face no charge at all.
Why Were UPI Charges Introduced Now?
Banks and payment companies have carried the full cost of running UPI for years. Processing volumes have grown massively. Maintaining servers, security, and settlement systems requires steady funding.
The new MDR creates a sustainable source of revenue for those providers. It applies only to a small share of high-value merchant transactions. Everyday payments that make up the bulk of volume stay free.
Credit-card MDR rates usually sit between 1.5 percent and 2.5 percent. Debit-card rates are capped near 0.9 percent. The 0.4 percent UPI rate is far lower, which helps keep digital payments attractive for businesses while protecting you from any direct cost.
What Stays Completely Free for You
Every person-to-person transfer stays free. You can move money between your own linked accounts or send it to anyone without limit or fee.
Any merchant payment of ₹2,000 or less carries zero MDR. Scanning a QR code at a kirana store, tea stall, or small shop costs you nothing extra regardless of the amount if the merchant qualifies under the small-merchant exemption.
Recurring AutoPay mandates, utility payments under the special categories, and routine daily spends continue without any charge on your side. UPI apps are barred from adding platform fees of any kind.
Practical Tips: How These UPI Charges Affect Your Daily Transactions
When you scan a QR code at a shop the amount you pay remains the displayed price. The merchant may incur MDR in the background, but that does not appear as an extra line on your receipt.
At a petrol pump or railway counter the merchant pays the flat ₹5 if the amount is above ₹2,000. You still pay only the fuel or ticket price.
If a shopkeeper ever asks for an extra “UPI fee,” you can refuse. The rules clearly prohibit passing the MDR on to customers. Banks have been instructed to enforce this.
For large online purchases or restaurant bills the merchant absorbs the 0.4 percent. Your bank statement shows only the exact amount you authorised. No monthly quota or volume limit applies to the free transactions you make.
F.A.Q.
Will you be charged anything when you pay via UPI after October 15, 2026?
No. UPI remains free for every consumer transaction. You face no fee of any kind.
Do person-to-person transfers attract any UPI charges?
No. All P2P transfers stay free for both the sender and the receiver, whatever the amount.
Can merchants add the MDR to your bill?
No. Merchants cannot pass the charge on to you. You pay only the listed price.
What happens on a ₹50,000 or ₹1 lakh payment?
On ₹50,000 the merchant pays ₹200. On ₹1 lakh the merchant pays the ₹300 cap. You still pay the full amount shown with no extra deduction or addition.
Are small shops and street vendors affected by the new UPI charges?
Most are not. Merchants receiving up to ₹1 lakh a month through UPI QR codes remain fully exempt.
Is there any monthly limit or quota on free UPI transactions for you?
No. There is no monthly cap, volume limit, or tiered restriction on free transactions for individual users.
Do special sectors like fuel or insurance have different rates?
Yes. Railways, telecom, insurance, fuel, and similar categories attract a flat ₹5 MDR on payments above ₹2,000 instead of the 0.4 percent rate.
Can UPI apps start charging platform fees?
No. UPI application providers are not allowed to levy any platform fee or other charge on payments made through UPI.
Wrapping Up
UPI charges in the new framework fall entirely on eligible merchants for higher-value payments. You continue to use the service exactly as before with zero cost on your side. P2P transfers, small purchases, and most everyday transactions stay free. The structure supports the long-term health of the network while keeping digital payments simple and accessible for every user. You can keep scanning, sending, and paying with confidence.
