UPI charges from Oct 15: Is your daily budget changing? From grocery, shopping to bills – here’s what you’ll pay

UPI payments above Rs 2,000 will attract a 0.4% Merchant Discount Rate (MDR) for select merchants from October 15. Customers will not pay the charge directly, while small traders, person-to-person transfers and most everyday payments will continue to get protection.

New Delhi: New UPI charges are set to change the way some large digital payments are handled in India. The National Payments Corporation of India (NPCI) has announced a Merchant Discount Rate (MDR) of 0.4% on specified person-to-merchant UPI transactions above Rs 2,000 from October 15, 2026.

The announcement has led to confusion among UPI users, many of whom depend on QR codes to pay for everything from groceries and restaurant bills to electricity and shopping. The most important detail is that the new MDR is a merchant-side charge. The customer will not be asked to pay it directly under the new system.

The Finance Ministry clarified on September 15 that UPI will continue to be free for person-to-person transfers, regardless of the amount sent. Payments to merchants up to Rs 2,000 will also be exempt from MDR.

What is MDR and who will pay it?

MDR is the fee charged within the digital payment system for accepting a payment. The money is shared among participating banks, payment service providers and UPI application providers.

Under the new rules, a qualifying merchant receiving Rs 3,000 through UPI will incur an MDR of Rs 12. A payment of Rs 10,000 will attract Rs 40. The rate is capped at Rs 300 per transaction for payments of Rs 75,000 or more.

ALSO READ: New UPI rules from 15 October 2026: What remains free, what will be charged? Explained

The cap means a payment of Rs 1 lakh or Rs 2 lakh will not attract more than Rs 300 MDR under this structure. The Finance Ministry says the system is intended to support the operation and expansion of UPI, including investment in infrastructure and cybersecurity.

Tea stalls, vegetable vendors and small shops

Everyday users are expected to face limited impact because of the exemptions.

A person buying tea for Rs 20, paying Rs 100 for vegetables or sending Rs 500 to a friend will not face a new UPI charge. Person-to-person transfers are free, and merchant payments up to Rs 2,000 are outside the MDR system.

Small merchants receiving up to Rs 1 lakh a month through UPI QR payments under the small-merchant classification will also continue to receive mandatory zero-MDR protection. This includes many local businesses, including small grocery shops, tea stalls and street vendors. The exact classification of a merchant will depend on the payment system and applicable rules.

ALSO READ: UPI MDR: Brokerages estimate annual industry revenue pool of up to Rs 20,000 crore

The Finance Ministry says about 96% of all person-to-merchant UPI transactions will be unaffected by the new system. The government has also said that banks must ensure merchants do not pass the MDR on to customers.

Rail tickets, petrol and insurance payments

Some sectors will have a separate flat MDR in place of the standard 0.4% rate. A flat MDR of Rs 5 per transaction will apply to payments above Rs 2,000 in specified essential and low-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs. This is a merchant-side charge, not an additional fee for the customer.

For example, a qualifying petrol pump payment of Rs 5,000 will incur Rs 5 in MDR under the special category. A qualifying insurance premium payment of Rs 10,000 will also attract Rs 5. The applicable category will depend on the merchant and payment classification.

Mutual funds and stock market payments

The new system also includes a separate rate for capital market transactions. Payments relating to mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02%, capped at Rs 300 per transaction.

A Rs 1 lakh mutual fund payment, for instance, would carry an MDR of Rs 20 under this rate. The lower charge is intended to support retail participation in formal financial markets.

Will UPI apps charge customers?

The Finance Ministry has clarified that MDR is not a tax and is not a charge collected by the government or NPCI. It is distributed among participants in the payment ecosystem.

UPI app providers are also prohibited from imposing platform fees or hidden charges on customers for these payments. Users will continue to use UPI through apps such as PhonePe, Google Pay, Paytm and BHIM without a new direct MDR charge.

ALSO READ: UPI transaction changes: Finance Ministry debunks 'foreign influence' claims

The government says the revenue will help support UPI infrastructure, cybersecurity and innovation. Five per cent of total MDR collections will go towards a dedicated fund to promote UPI acceptance among small businesses and support expansion in underserved areas.

What users should remember

The new rule does not mean every UPI payment will carry a fee. The main change is for selected merchant payments above Rs 2,000 from October 15, 2026.

Customers have a few straightforward points to keep in mind – person-to-person transfers are free, payments up to Rs 2,000 to merchants are outside MDR and small merchants covered by the zero-MDR rules continue to receive protection.

The Finance Ministry has advised users to refer to official information from the government, NPCI and banks. Merchants should check their applicable payment category and billing arrangements before the new rules take effect.

The latest official updates include the Finance Ministry’s September 15, 2026 announcement that UPI will continue to be free for person-to-person payments, while 96% of merchant transactions will not be affected by the new MDR rules. The Department of Financial Services also issued the official MDR announcement and FAQs on September 15.

Reuters reported that India’s UPI system would introduce MDR on large merchant payments.

Stay informed on all the latest news, real-time breaking news updates, and follow all the important headlines in india news and world news on Zee News.