UPI Payments Up to ₹2,000 Remain Free: What Happens to Higher-Value Transactions?

The Centre has clarified the new framework for charges around UPI payments. Payments to merchants up to ₹2,000 will remain free, while specified higher-value merchant transactions will attract a Merchant Discount Rate (MDR) from October 15, 2026.

Person-to-person UPI transfers will remain completely free regardless of the amount. Customers making merchant payments up to ₹2,000 through UPI will also not have to pay a transaction charge.

What about payments above ₹2,000?

From October 15, a 0.4% MDR will apply to specified person-to-merchant UPI transactions above ₹2,000. The rate will be capped at ₹300 for transactions of ₹75,000 and above. Certain essential sectors have separate flat-rate provisions, while capital-market transactions have a lower MDR.

Importantly, MDR is a charge within the merchant payment ecosystem, not a government tax or an automatic fee deducted from the customer. Banks have been advised to ensure that merchants do not pass the MDR on to customers.

Small merchants receiving up to ₹1 lakh a month through UPI QR codes under the applicable small-merchant framework will continue to receive zero MDR. The government says the framework is intended to support the long-term sustainability of UPI while protecting individuals and small businesses from additional charges.