UPI Charges Above ₹2,000: New MDR Rules From 15 October 2026
Last updated 26 September 2026 · Checked against the official Department of Financial Services FAQ
From 15 October 2026, larger UPI payments to merchants carry a small fee called MDR. Customers still pay nothing extra. Here's exactly who pays, how much, and who is exempt.
Calculate UPI charges on any amount →
In short
- Customers: UPI stays free. No extra charge when you pay or send money.
- Merchants: 0.4% MDR on payments above ₹2,000, capped at ₹300.
- Small shops under ₹1 lakh a month of UPI QR receipts: zero MDR.
- More than 95% of UPI merchant payments are ₹2,000 or less, so they're unaffected.
Worried as a customer? Read Is UPI still free?
What is UPI MDR?
MDR stands for Merchant Discount Rate (full explanation). It's the fee a business pays its bank or payment provider for accepting a digital payment. Cards have always had MDR. UPI ran on a zero-MDR model for years, which is why accepting UPI cost merchants nothing. The new framework introduces a small MDR on larger UPI merchant payments to fund the system's upkeep.
What changed and when
The Ministry of Finance issued a Gazette notification on 14 September 2026, and NPCI followed with a circular to banks and payment companies on 15 September 2026. The Department of Financial Services later published an FAQ. The new rules take effect on 15 October 2026.
New UPI charges: full rate table
| Type of UPI payment | MDR |
|---|---|
| Merchant payment of ₹2,000 or less | Zero |
| Merchant payment above ₹2,000 | 0.4%, max ₹300 |
| Concessional sectors, above ₹2,000 | Flat ₹5 |
| Capital markets (mutual funds, brokers), above ₹2,000 | 0.02%, max ₹300 |
| Small merchant (≤ ₹1 lakh/month via UPI QR) | Zero |
| UPI AutoPay / mandates | No prescribed MDR |
| Person-to-person transfer | Zero |
| RuPay credit card on UPI | Credit card rules (see here) |
See the exact deduction for every amount in the UPI MDR chart.
Who pays: merchant, not customer
MDR is deducted from the money the merchant receives, so the customer pays the same price as before. Merchants cannot add MDR to the customer's bill, and UPI apps are not allowed to charge users a platform fee under this framework.
The ₹2,000 threshold
MDR applies only when a single payment is more than ₹2,000. It's per payment, not per day. Everyday purchases like groceries, tea or auto fares are almost always under this limit.
The ₹300 cap
MDR is 0.4% of the payment, but never more than ₹300. The cap is reached at ₹75,000, so a ₹75,000 payment and a ₹2,00,000 payment both carry ₹300 MDR.
Small merchant exemption
Merchants receiving up to ₹1 lakh a month through UPI QR codes stay at zero MDR, even on individual payments above ₹2,000. You don't need GST registration to qualify, and you don't need a new QR code. If your UPI receipts go above ₹1 lakh a month for 3 months in a row, you move into the regular merchant category.
Flat ₹5 for concessional sectors
These sectors pay a flat ₹5 MDR on payments above ₹2,000 instead of 0.4%:
- Railways
- Telecom services
- Insurance
- Fuel
- Public utility bills: electricity, municipal water and piped natural gas
- Educational institutions
Mutual funds and stock brokers: 0.02%
Capital market payments, such as mutual fund purchases and payments to brokers, carry a much lower MDR of 0.02%, with the same ₹300 cap.
UPI AutoPay and recurring payments
UPI Mandates, also called AutoPay, used for subscriptions, SIPs and recurring bills, do not carry prescribed MDR charges.
PhonePe, Paytm and Google Pay for Business
The MDR framework applies to UPI merchant payments whichever app or QR code you use, including PhonePe Business, Paytm for Business, Google Pay for Business and bank QR codes. Separately, your app or bank may charge for other services like soundbox rental or instant settlement. Those fees are not part of the MDR framework, so check your provider's fee page.
GST on UPI MDR
MDR is a bank service fee, and bank service fees in India normally attract 18% GST on the fee amount, not on the payment. On a ₹10,000 payment, that means ₹40 MDR plus ₹7.20 GST. GST-registered merchants can generally claim this as input tax credit. The official FAQ doesn't address GST, and the rate on MDR has been reported as a possible GST Council topic, so treat it as subject to change. Our calculator lets you switch GST on or off.
How UPI compares with cards
UPI stays much cheaper to accept than cards (compare for your amount). Credit card MDR typically ranges from 1.5% to 2.5%, and debit card MDR can be up to 0.9%. UPI's 0.4%, capped at ₹300, is lower than both.
Does UPI mean more tax?
No. There's no GST or income tax on UPI payments themselves, but UPI receipts do show your turnover. Read UPI payments, GST and income tax notices.
What merchants should do now
- Check your monthly UPI QR total. Under ₹1 lakh means you're exempt.
- Expect slightly lower settlements on payments above ₹2,000 from 15 October, and tell your accountant.
- Keep GST invoices from your bank or payment provider to claim input tax credit.
- Don't add a surcharge to customers who pay by UPI.
- Confirm your category with your bank if you're in a ₹5 or 0.02% sector.
Frequently asked questions
What is UPI MDR? What is its full form?
MDR stands for Merchant Discount Rate. It is the fee a merchant pays its bank or payment provider for accepting a digital payment. From 15 October 2026, UPI merchant payments above ₹2,000 carry an MDR of 0.4%, capped at ₹300.
Will UPI payments cost customers money from 15 October 2026?
No. The MDR is paid by the merchant, not the customer. Merchants cannot pass it on, and UPI apps are not allowed to charge users a platform fee.
Does UPI MDR apply to sending money to friends and family?
No. Person-to-person (P2P) UPI transfers remain free at any amount.
I run a small shop. Will I pay UPI MDR?
If your UPI QR receipts are up to ₹1 lakh a month, you stay at zero MDR, and you don't need GST registration to qualify. You move to the regular merchant category only if your receipts cross ₹1 lakh a month for 3 months in a row.
Is the ₹2,000 limit per payment or per day?
Per payment. A ₹1,800 payment has zero MDR even if you receive many of them in a day.
Do UPI AutoPay payments attract MDR?
No. UPI Mandates or AutoPay, used for recurring payments such as subscriptions, bills and SIPs, do not carry prescribed MDR charges.
Do the new rules apply on PhonePe, Paytm and Google Pay for Business?
Yes. The MDR framework applies to UPI merchant payments regardless of which app or QR you use. Your payment app or bank may also have its own separate charges, such as soundbox rental, so check your provider's fee page.
What is 'UPI MDR recovery' on my bank statement?
'MDR recovery' is not an official NPCI term. It is usually a label your bank or payment provider uses when it deducts a processing fee from your settlements, for example on RuPay credit card payments via UPI. Ask your bank for the fee breakup if you're unsure.
Can I claim GST paid on UPI MDR as input tax credit?
GST-registered merchants can generally claim GST charged on bank service fees such as MDR as input tax credit. Businesses dealing only in exempt goods or services usually cannot. Check with your accountant.
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Sources
Primary source: Department of Financial Services, FAQs on MDR on select UPI (P2M) transactions. Also informed by coverage from PayU, SCC Online, Business Today and Kotak Neo. This guide is for information only and is not legal or tax advice.