UPI Changes: What Users and Merchants Need to Know
A charge of 0.4% will apply to UPI payments exceeding ₹2,000. The fee is capped at a maximum of ₹300, with the specific amount depending on the individual transaction. This charge will be levied on businesses rather than customers.
However, no fees will be charged to either customers or businesses for UPI payments up to ₹2,000. The Ministry of Finance clarified this position in a notification issued on Monday. Payments made via RuPay debit cards are also included in this exemption.
The government launched an incentive scheme in 2021-22 to promote UPI and keep it free of charge. Under this scheme, an incentive of 0.15% was provided for UPI payments of up to ₹2,000.
By 2024-25, incentives totaling ₹8,276 crore had been disbursed. As of June 2026, there were approximately 55.5 crore UPI users in the country.
UPI Continues to Remain Free for Peer to Peer Transactions and 96% of Merchant Transactions
The new UPI framework will not affect person-to-person payments. People can continue sending and receiving money through UPI for free, regardless of the amount. There will be no transaction fee, platform fee or other charge on individuals.
Small payments to merchants will also largely remain free. UPI payments of up to ₹2,000 to merchants will not attract any Merchant Discount Rate (MDR). Small merchants such as street vendors and neighborhood shops receiving up to ₹1 lakh a month through UPI QR codes will also continue to get zero MDR.
As a result, around 96% of merchant transactions are expected to remain unaffected. MDR will apply only to certain larger merchant transactions above ₹2,000.
For eligible merchant payments above ₹2,000, the MDR will be 0.4%. For transactions of ₹75,000 or more, it will be capped at ₹300 per transaction. In essential sectors such as railways, telecom, insurance, fuel and agricultural inputs, transactions above ₹2,000 will attract a flat MDR of ₹5. Payments related to mutual funds, securities, stockbrokers and dealers will have a lower MDR of 0.02%, capped at ₹300.
Importantly, customers will not have to pay MDR. It is a charge within the merchant payment system and is shared among banks, payment service providers and UPI app providers. Banks have been advised to ensure that merchants do not pass this cost on to customers.
The framework also does not impose any monthly limit on free UPI usage. Daily transaction limits set by banks and NPCI are meant for security and risk management, not for charging users.
A dedicated fund will also be created for small merchants, with an amount equal to 5% of MDR collections going towards promoting UPI adoption and usage.
The overall aim is to make UPI financially sustainable while keeping everyday digital payments free for individuals and protecting small businesses from additional costs.