New UPI Charges: 0.4% Merchant Fee on Payments Above ₹2,000

The new UPI charges of a 0.4% Merchant Discount Rate (MDR) will be charged to business UPI transactions over ₹2,000 from October 15, 2026. However, regular person-to-person payments will stay completely free.

Introduced by the National Payments Corporation of India (NPCI) on 15th of September, 2026, the new UPI charges have caught the deep interest of businesses and customers across India. This is because around 6.5 crore merchants and small businesses use UPI payments, raising questions about how these charges will affect them. Are small businesses affected, or will customers also have to pay these charges? By getting complete knowledge of what the new UPI merchant fee is, the charges applied, why it is introduced, and its effect on small businesses and customers, you can free yourself from all confusion regarding it.

Table of Contents

What Is the New UPI Merchant Fee?

National Payments Corporation of India (NPCI) is going to introduce the new UPI charges of 0,4% Merchant Discount Rate (MDR) on person-to-merchant (P2M) transactions of over ₹2,000. This will be effective from the 15th of October and will apply to merchants, including:

Large Retailers and Supermarkets,
Online E-commerce Platforms,
Restaurants and Hospitality, and
High-Volume Regular Merchants.

Why Is a UPI Merchant Fee Being Proposed?

The reason why the new UPI transaction charges are being implemented:

1. Infrastructure and Cybersecurity Costs

According to recent data, in India, around 66 crore to 73 crore UPI transactions happen daily. This highlights the need for constant, expensive upgrades to servers and fraud protection tools to increase digital security.

2. Ending Reliance on Subsidy

The new UPI transaction charges are introduced to reduce dependency on support from the government for running and maintaining the UPI applications and ecosystem. Instead of depending on government support, the UPI systems will be able to generate revenue from transactions themselves.

3. Market-Linked Revenue

A nominal fee of 0.4% on transactions over ₹2,000 can offer banks and payment companies a way to earn revenue from UPI. This revenue can further be used to improve safety, features, and services in the payment systems.

New UPI Charges Above ₹2,000: Overview of 0.4% Merchant Fee

Here is a table simplifying how the merchant charges under the new UPI transaction charges will work:

Transaction Type	Transaction Value	Proposed Merchant Charge	Who Pays?	Customer Impact
Small UPI Payments	Up to ₹2,000	₹0 (Free)	No merchant fee	No direct charge
Standard Merchant Payments	Above ₹2,000	0.4% of transaction value, capped at ₹300 for transactions of ₹75,000 and above	Merchant	Depends on whether the merchant passes on the cost
Large Retail and Online Payments	Above ₹2,000		Merchant	No direct UPI fee for the customer
Small Vendors and Street Traders	Within applicable limit	₹0 (Free)	No merchant fee	No direct charge
P2P UPI Transfers	Any amount
Recurring UPI Payments	Eligible recurring payments

Are Small Businesses Affected by the New UPI Charges

According to the Press Information Bureau (PIB), small merchants, including street vendors and neighborhood shops who are receiving payments up to ₹1 lakh per month through QR codes, will face no MDR charges on all transactions. Under the new UPI transaction charges new rules, they are free from

Further in the report, it is stated that the new UPI transaction fee rules will be applied to only about 4% of merchant payments. This leaves approximately 96% of P2M transactions that will be unaffected due to lower transactions under ₹2,000.

Will Customers Have to Pay More Under New UPI Charges?

In short, no, the customer will not have to pay the 0.4% rate on the transaction they make. These new UPI payment rules only apply to peer-to-merchant (person-to-merchant) payments above ₹2,000.

In addition to that, as per the press release on the Press Information Bureau (PIB) report, it is written that banks are also advised that the new MDR charges are not passed on to the customers.

Therefore, general users and customers buying groceries, shopping, or sending monthly expenses to parents need to take no stress over whether they will also be charged as well.

Conclusion

The new transaction charges on UPI are going to be implemented from the 15th of October, 2026. Under this framework, a 0.4% MDR, capped at ₹300 per transaction. will be levied on merchants for transactions crossing a limit of ₹2,000. However, small merchants, shopkeepers, and street vendors are exempt from paying under specific conditions. Also, the general public and customers are not required to pay the new UPI transaction charges. or more updates and simple explainers on digital payments, business, and everyday developments, stay connected with DDelhi.

Also Read: MCD Property Tax Delhi: How to Calculate and Pay Online

Frequently Asked Questions (FAQs)

What are the new UPI charges from October 15, 2026?

The new UPI charges for merchants from October 15, 2026, are a new framework where a 0.4% MDR is charged, capped at ₹300 for every transaction for payments of ₹75,000 and above.

Will UPI payments above ₹2,000 be charged?

Except for ordinary users and small businesses under specific conditions, UPI payments will be charged if they are above ₹2,000.

Who will pay the 0.4% UPI transaction fee?

The 0.4% UPI transaction fee will be paid by merchants who receive person-to-merchant payments above ₹2,000.

Will customers have to pay any UPI charges?

No, customers do not have to pay the new UPI charges.

Does the new UPI charge apply to person-to-person (P2P) payments?

No, the UPI charges do not apply to person-to-person (P2P) payments.

What are the new UPI transaction charges for merchants?

The UPI charges for merchants introduce a new Merchant Discount Rate (MDR) of 0.4%.

Which merchants are exempt from the new UPI charges?

Small merchants who have monthly UPI payments up to ₹1 lakh are completely exempt from the new UPI charges.

Are small vendors and street sellers exempt from UPI MDR?

Yes, small vendors and street sellers are exempt from the UPI merchant charges if their monthly online transactions are up to ₹1 lakh.

Is the 0.4% UPI charge applicable to every payment above ₹2,000?

No, the 0.4% MDR does not apply to every UPI payment above ₹2,000.

What happens if a merchant asks customers to pay the UPI charge?

Merchants are strictly prohibited from passing the 0.4% MDR on to their customers.

What is MDR in UPI and how does the new fee work?

MDR (Merchant Discount Rate) in UPI is a processing fee paid by businesses when they accept payments digitally. Under the new fee rule, 0.4% is applicable for merchant payments crossing ₹2,000.

Which sectors have special UPI charges instead of the 0.4% MDR?

Sectors that have special UPI merchant charges include: