New UPI Charges from 15 Oct 2026, Explained
NPCI will charge 0.4% on some UPI merchant payments above ₹2,000 from 15 October 2026. Who pays, who is exempt, and why your UPI stays free.
By SmartFigure Editorial Team
· 4 min read
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In mid-September 2026, the National Payments Corporation of India (NPCI) announced that UPI will no longer be completely free for businesses. From 15 October 2026, a small fee called the merchant discount rate (MDR) will apply to some larger UPI payments made to shops and companies. Headlines like “UPI charges are coming” have worried many people, so here is exactly what changes, and what does not.
The short answer
- You, the customer, do not pay anything. Sending money or paying a shop by UPI stays free for you.
- Sending money to friends and family stays free, whatever the amount.
- Businesses pay 0.4% on some UPI payments above ₹2,000, capped at ₹300 per payment.
- Small shops are exempt if they receive up to ₹1 lakh a month through UPI QR codes.
- Shops are not allowed to add the fee to your bill.
What exactly is changing
| Before 15 Oct 2026 | From 15 Oct 2026 | |
|---|---|---|
| Person to person (P2P) | Free | Free |
| Payment to a merchant, up to ₹2,000 | Free | Free |
| Payment to a merchant, above ₹2,000 | Free | 0.4%, paid by the merchant |
| Maximum fee per payment | – | ₹300 (reached at ₹75,000) |
| Fee charged to the customer | None | None |
The fee is an MDR: the same kind of charge businesses already pay when you swipe a debit or credit card. The merchant’s bank deducts it from the money the merchant receives. It never appears in your UPI app.
How much a business will pay
| Payment to a merchant | Fee (paid by the merchant) |
|---|---|
| ₹500 | ₹0 |
| ₹2,000 | ₹0 |
| ₹3,000 | ₹12 |
| ₹10,000 | ₹40 |
| ₹50,000 | ₹200 |
| ₹75,000 or more | ₹300 (cap) |
For comparison, businesses typically pay around 1.5–2% or more on credit card payments, so UPI stays the cheaper option for them.
Who is exempt
- Person-to-person transfers: sending money to family, friends or your own accounts stays free at any amount.
- Payments up to ₹2,000: according to NPCI, these make up over 95% of merchant payments on UPI, so most everyday payments are untouched.
- Small merchants: businesses receiving up to ₹1 lakh a month through UPI QR codes stay at zero MDR. They do not need GST registration to qualify.
- RuPay credit cards linked to UPI: NPCI’s FAQs say these are not covered by the new framework.
Special rates for some categories
According to NPCI’s FAQs on the framework, some categories get lower charges on payments above ₹2,000:
| Category | Charge |
|---|---|
| Railways, telecom, insurance, fuel and other utilities | ₹5 flat per payment |
| Educational institutions | Concessional, capped rates |
| Capital markets (e.g. adding money to a trading account) | 0.02%, capped at ₹300 |
The exact rates for each category are set by NPCI and banks, so check your bank’s schedule if you run a business in one of these areas.
Can a shop charge me extra for paying by UPI?
No. NPCI’s FAQs state that merchants are not permitted to pass the MDR on to customers. If a shop adds a “UPI charge” to your bill, it is breaking the rules. You can refuse to pay it, raise a complaint through the help or dispute section of your UPI app, or contact the shop’s bank. NPCI also runs a dispute redressal mechanism for UPI complaints.
UPI apps are also prohibited from charging a platform fee on these payments.
Why is UPI being charged now?
Since January 2020, UPI payments to merchants have had zero MDR by law, to encourage digital payments. Banks and payment apps carried the cost of running the system, supported partly by government incentives. UPI has since grown to billions of transactions a month, and the cost of servers, fraud prevention and cybersecurity has grown with it.
NPCI says the new fee will fund technology upgrades, fraud prevention and cybersecurity, plus a support fund for small merchants. It also reduces the system’s dependence on government subsidies. Critics worry that this could be a first step towards fees for ordinary users, but under the current framework person-to-person payments and small payments remain free.
What it means for you
If you are a customer: nothing changes. Keep paying by UPI as usual, and do not accept any extra “UPI fee” at a shop.
If you run a small shop: if your UPI QR receipts are up to ₹1 lakh a month, you pay nothing. Above that, you pay 0.4% only on individual payments above ₹2,000.
If you run a larger business: estimate your cost. For example, a store that receives 300 UPI payments of ₹5,000 each in a month pays ₹20 per payment, or ₹6,000 a month (0.4% of ₹15 lakh). Payments of ₹2,000 or less remain free.
Frequently asked questions
Will I be charged for paying my rent or school fees by UPI? Rent paid to a person (P2P) stays free. School fees paid to an institution above ₹2,000 may attract a concessional MDR, paid by the school, not by you.
Are UPI Lite and small payments affected? Payments of ₹2,000 or less are outside the MDR framework, so small everyday payments, including UPI Lite payments, stay free.
Is GST involved? Businesses already account for GST on their sales as before. To work out GST on an invoice, use the GST calculator.
When does it start? 15 October 2026. NPCI gave banks and apps time until then to update their systems.
Sources
- National Payments Corporation of India (NPCI): npci.org.in
- NPCI’s FAQs on the UPI MDR framework, September 2026
This article is for general information and education, not financial, tax or investment advice. Rules and rates change; check official sources or consult a qualified professional before acting. See our disclaimer.