UPI transaction charges: Check which payments can now attract a fee from October 2026

UPI payments will not suddenly become chargeable for everyone. From October 15, 2026, MDR will apply only to specified person-to-merchant transactions above ₹2,000. Person-to-person transfers will remain free, while merchant payments up to ₹2,000 will stay outside the MDR framework. The Finance Ministry says around 96% of P2M transactions will remain unaffected.

Merchant Discount Rate, or MDR, is a fee within the payment ecosystem rather than a direct charge on the customer. Under the new framework, a 0.4% MDR will apply to specified merchant transactions above ₹2,000. The amount is shared among participants such as banks, payment service providers and UPI app providers.

The specified transactions include merchant payments above ₹2,000 and payments for railways, telecom, insurance, fuel and agricultural inputs above the same threshold. Capital-market payments are also covered, including mutual funds, securities, stockbrokers and dealers. However, different MDR rates apply to essential sectors and capital-market transactions.

For a standard merchant transaction above ₹2,000, the MDR rate is 0.4%. That means a ₹5,000 transaction would result in an MDR of ₹20. For a ₹50,000 payment, the calculation gives ₹200. Once the transaction reaches ₹75,000, however, the ₹300 maximum cap applies instead of charging 0.4% on the full amount.

The standard MDR is capped at ₹300 for merchant transactions of ₹75,000 or more. So, while 0.4% of a ₹1 lakh payment would mathematically be ₹400, the applicable MDR is limited to ₹300. Payments below ₹2,000 do not attract MDR under this framework. The fee is part of the merchant payment ecosystem.

Some essential and thin-margin sectors will follow a separate pricing structure. UPI transactions above ₹2,000 for railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat MDR of ₹5 per transaction. These payments will therefore not use the standard 0.4% rate applicable to other specified merchant transactions.

Capital-market transactions have a separate, lower MDR rate of 0.02%, subject to a maximum of ₹300 per transaction. This category covers payments involving mutual funds, securities, SEBI-registered stockbrokers and dealers. It can include UPI payments for equity purchases, debt-market investments, mutual fund purchases and broker wallet top-ups.

The Finance Ministry says MDR is not a charge imposed on customers making UPI payments. Banks have been advised to ensure merchants do not pass the MDR on to customers, while UPI app providers are prohibited from imposing platform fees or hidden charges. Individuals will continue to have unlimited free UPI usage, without monthly quotas or volume-based limits.

Do not confuse your UPI transaction limit with the MDR threshold. Banks and NPCI may prescribe daily limits, generally ranging from ₹1 lakh to ₹5 lakh depending on the transaction category, mainly for security and risk management. These limits do not determine whether MDR applies. MDR instead depends on the type and value of the transaction.