How UPI MDR works from 15 October 2026
MDR (Merchant Discount Rate) is the fee a merchant pays for accepting a digital payment. UPI had zero MDR for years. From 15 October 2026, NPCI's new framework adds a small MDR on larger person-to-merchant (P2M) UPI payments. The customer still pays the normal price; the fee is deducted from what the merchant receives.
The rules at a glance
- ₹2,000 or less: zero MDR.
- Above ₹2,000: 0.4% MDR, capped at ₹300 per payment (the cap is reached at ₹75,000).
- Concessional sectors (railways, telecom, insurance, fuel, utility bills, educational institutions): flat ₹5 MDR above ₹2,000.
- Mutual funds and stock brokers: 0.02% MDR, max ₹300.
- UPI AutoPay: no prescribed MDR.
- Small merchants receiving up to ₹1 lakh a month via UPI QR: zero MDR.
- Person-to-person transfers: always free. Is UPI free for customers?
- GST: 18% on the MDR fee only, not on the payment amount.
- RuPay credit card on UPI: different, higher card rates. See RuPay credit card UPI charges.
Read the full breakdown of UPI charges above ₹2,000, checked against the official government FAQ.
How the calculation works
MDR = payment × 0.4% (maximum ₹300). GST = MDR × 18%. Merchant receives = payment − MDR − GST. For a ₹10,000 payment: MDR is ₹40, GST is ₹7.20, and the merchant receives ₹9,952.80.
UPI MDR examples for a standard merchant
| Payment | MDR | GST (18%) | Merchant receives |
|---|---|---|---|
| ₹1,500 | ₹0.00 | ₹0.00 | ₹1,500.00 |
| ₹2,000 | ₹0.00 | ₹0.00 | ₹2,000.00 |
| ₹3,000 | ₹12.00 | ₹2.16 | ₹2,985.84 |
| ₹5,000 | ₹20.00 | ₹3.60 | ₹4,976.40 |
| ₹10,000 | ₹40.00 | ₹7.20 | ₹9,952.80 |
| ₹25,000 | ₹100.00 | ₹18.00 | ₹24,882.00 |
| ₹50,000 | ₹200.00 | ₹36.00 | ₹49,764.00 |
| ₹75,000 | ₹300.00 | ₹54.00 | ₹74,646.00 |
| ₹1,00,000 | ₹300.00 | ₹54.00 | ₹99,646.00 |
Need a specific amount? See the full UPI charges chart from ₹2,000 to ₹1 lakh.
यह कैलकुलेटर हिंदी में भी उपलब्ध है।
More tools and guides for merchants
- UPI vs debit card vs credit card charges: which payment costs you least
- Soundbox charges: PhonePe vs Google Pay vs Paytm per month
- What is MDR? Meaning, full form, P2PM vs P2M
- Can UPI payments trigger a GST or income tax notice?
- Is UPI still free for customers?
Frequently asked questions
When do the new UPI MDR charges start?
The new MDR framework applies from 15 October 2026. It was announced by NPCI on 15 September 2026.
Is UPI still free for customers?
Yes. MDR is a merchant-side fee. Customers paying by UPI are not charged anything extra, person-to-person (P2P) transfers remain free, and UPI apps cannot charge users a platform fee.
Which UPI payments attract MDR?
Person-to-merchant (P2M) UPI payments above ₹2,000 attract 0.4% MDR. Payments of ₹2,000 or less have zero MDR.
What is the maximum UPI MDR on one payment?
MDR is capped at ₹300 per transaction, which is reached at ₹75,000. With 18% GST on the MDR, the maximum total deduction is ₹354.
Are small merchants exempt from UPI MDR?
Yes. Small merchants receiving up to ₹1 lakh a month through UPI QR codes pay zero MDR, even on payments above ₹2,000, and don't need GST registration to qualify. A merchant moves to the regular category only after crossing ₹1 lakh a month for 3 months in a row.
Which sectors pay a flat ₹5 MDR?
Railways, telecom, insurance, fuel, public utility bills (electricity, water, piped gas) and educational institutions pay a flat ₹5 MDR on payments above ₹2,000 instead of 0.4%.
What is the UPI MDR for mutual funds and stock brokers?
Capital market payments, such as mutual fund purchases and payments to brokers, carry 0.02% MDR with a ₹300 cap.
Is UPI AutoPay charged MDR?
No. UPI Mandates or AutoPay, used for subscriptions, bills and SIPs, do not carry prescribed MDR charges.
Is GST charged on UPI MDR?
MDR is a bank service fee, which normally attracts 18% GST on the fee amount, not on the payment. On a ₹5,000 payment, MDR is ₹20 and GST is ₹3.60. GST-registered merchants can usually claim this as input tax credit. The official FAQ does not address GST, so the calculator lets you switch it off.
Does the 0.4% UPI MDR apply to RuPay credit cards on UPI?
No. RuPay credit cards on UPI follow standard credit card MDR rules, which are usually higher and set by each bank.
Can a merchant charge customers extra to cover MDR?
No. Banks and payment providers have been directed to ensure merchants do not pass MDR on to customers. The MDR is deducted from the merchant's settlement.