No UPI fee for users, select merchant transactions may face charges: Govt

The Indian government on Saturday (August 08) clarified that users will not have to pay transaction charges for making payments through the Unified Payments Interface (UPI). However, it opened the possibility of introducing a nominal Merchant Discount Rate (MDR) on a limited set of UPI merchant transactions above a specified threshold.

The Finance Ministry said any future MDR on UPI would not apply to all merchant transactions. It also said the rate would remain substantially lower than the charges applicable to debit and credit card payments.

"As and when MDR charges are introduced, they will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs," the Finance Ministry said in a release.

The ministry added that the "vast majority" of UPI transactions would continue to remain free for merchants. Any MDR, if introduced, would depend on a threshold and would not become a blanket charge.

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UPI users and person-to-person payments to remain free

The clarification came in connection with the Taxation and Other Laws (Amendment) Bill, 2026. The Bill proposes changes to Section 10A of the Payment and Settlement Systems Act, 2007.

If Parliament passes the Bill, the "UPI and Services Steering Committee", headed by the National Payments Corporation of India (NPCI), will decide whether to introduce MDR and determine its framework, according to the ministry.

The government stressed that the proposed amendment only creates an enabling provision and does not mean that charges will be imposed on ordinary UPI users.

"UPI will remain free for citizens," the Ministry said, adding that all person-to-person transactions will also continue to remain free.

The government said the rapid growth in UPI transactions requires continuous investment in cybersecurity, fraud prevention and payment infrastructure.

Govt cites need for sustainable UPI ecosystem

The Finance Ministry also said the digital payments ecosystem needs a sustainable revenue framework to encourage more companies to expand their operations.

"Reliance on subsidies alone is not viable for the next wave of growth. A balanced framework is required to ensure that UPI remains robust, inclusive, and future-ready," the Ministry said.

The government said the proposed amendment forms part of its broader effort to make India's digital payment infrastructure sustainable and competitive. It also aims to ensure that the system can support the country's expanding digital economy.

The ministry rejected reports claiming that external influences had prompted the proposed policy changes. It described such claims as "unfounded, completely false and misleading."

According to ministry data, UPI has become the world's largest real-time payment system. It processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone. UPI is currently live in 11 foreign countries, while several other countries have also shown interest in the digital payment system.