UPI users in India will see a change in the payment system from October 15, 2026, when new Merchant Discount Rate (MDR) rules come into effect for certain UPI merchant payments.
The most important point for users is simple: they will not have to pay any new charges to send money to another individual through the UPI service. The new MDR will be implemented for specified person-to-merchant (P2M) UPI transactions exceeding ₹2,000.
The MDRs for eligible merchant transactions will be 0.4% and capped at ₹300 per transaction. This charge is in the merchant payment ecosystem and isn't designed to be directly imposed on consumers.
Will You Have to Pay a UPI Charge?
For most everyday UPI users, the answer is no.
The new MDR will not apply when sending ₹5000 to a friend, relative or another person using UPI. Person-to-person (P2P) UPI transactions will be free of cost.
The new charge is for certain payments, for instance, if you make a payment to a shop, business or other eligible merchant using UPI for goods or services.
So, there is an important difference between:
Sending ₹5,000 to a friend: No new MDR.
Paying a merchant ₹5,000: A 0.4% MDR can apply under the new rules, subject to the applicable exemptions and conditions.
What Is the New UPI Charge?
The new charge is called the Merchant Discount Rate (MDR).
From October 15, 2026, a 0.4% MDR will apply to specified UPI merchant transactions above ₹2,000.
For example:
Merchant UPI Payment | MDR at 0.4% |
| ₹2,000 | No MDR |
| ₹3,000 | ₹12 |
| ₹5,000 | ₹20 |
| ₹10,000 | ₹40 |
| ₹25,000 | ₹100 |
| ₹50,000 | ₹200 |
| ₹75,000 | ₹300 |
| ₹1,00,000 | ₹300 maximum |
For transactions of ₹75,000 or more under the standard MDR category, the charge is capped at ₹300 per transaction.
Who Will Actually Pay the MDR?
This is where the new UPI rule can be confusing.
The MDR is a charge associated with merchant payments, rather than a new fee that UPI users are required to pay directly.
The announced framework does not allow the MDR to be directly passed on to consumers as a UPI transaction fee. Therefore, if you make an eligible ₹10,000 UPI payment to a merchant, the new system does not mean that ₹40 will automatically be added to your payment as a consumer UPI fee.
The cost is handled within the merchant payment ecosystem among the participating payment entities.
What Happens If You Pay Less Than ₹2,000?
In the new framework, UPI merchant payments of ₹2,000 or less will be free.
For instance, if you purchase groceries worth ₹1,800 and pay through UPI, then the new MDR of 0.4% would not apply.
This implies that most of the everyday UPI payments will go on without the new MDR.
What About Sending Large Amounts to Friends or Family?
There is no new MDR simply because a person-to-person UPI transfer is large.
For example:
- Send ₹5,000 to a friend — No new MDR
- Send ₹20,000 to a family member — No new MDR
- Receive ₹50,000 from another person — No new MDR
The ₹2,000 threshold discussed in the new rules relates to specified merchant payments, not ordinary person-to-person transfers.
Are All Merchants Affected?
No.
The new structure provides an exemption for certain small merchants. NPCI, under the framework, classifies small merchants as those who receive up to ₹1 lakh in a month using the UPI QR system. Such eligible merchants can continue to receive UPI payments without MDR.
This distinction is particularly relevant for small shops and businesses that depend heavily on QR-code payments.
Are There Different Charges for Some Payments?
Yes. The 0.4% rate is only applicable to all eligible UPI merchant transactions.
In certain parameters like railways, telecom, insurance, fuel, etc., the MDR will be flat at ₹5 on transactions exceeding ₹2000.
Capital-market transactions also come with their own rate of 0.02% with a maximum MDR of ₹300 per transaction.
Hence, the term “UPI will now charge 0.4%” is not a true reflection of all UPI transactions.
When Will the New UPI Charges Start?
The new MDR framework will take effect on October 15, 2026.
Until then, users should not assume that every UPI payment above ₹2,000 is already subject to the new MDR.
The new rules are designed specifically around eligible merchant transactions and include different rates, exemptions and limits depending on the type of payment.
What Does This Mean for UPI Users?
For the average UPI user, the change is narrower than the headlines may suggest.
You can continue to use UPI to:
- Send money to friends and family
- Receive money from other people
- Make merchant payments up to ₹2,000
- Make eligible payments to small merchants covered by the exemption
The new MDR becomes relevant mainly when making specified merchant payments above ₹2,000.
The main idea is that UPI is not turning into a paid service for all and for all transactions. The MDR will be applicable on specified merchant payments exceeding ₹2,000 at a 0.4% rate from October 15, 2026, subject to certain exemptions and capped at ₹300 for standard transactions. There will be no fees for person-to-person transfers.
FAQs
1. Will UPI charges apply to users from October 15, 2026?
No. Users will not have to pay a new UPI fee for sending money to another person. The new MDR applies to specified merchant payments above ₹2,000.
2. What is the new UPI charge above ₹2,000?
A 0.4% Merchant Discount Rate (MDR) will apply to eligible person-to-merchant UPI transactions above ₹2,000. The MDR is capped at ₹300 for standard transactions.
3. Who will pay the new UPI MDR?
The merchant will bear the MDR within the payment ecosystem. It is not intended to be directly charged to the customer as an additional UPI fee.
4. Will sending money to friends or family through UPI be charged?
No. Person-to-person UPI transfers will remain free, regardless of the amount transferred. The new MDR applies to specified merchant payments.
5. Is there a UPI charge for payments below ₹2,000?
No. Eligible UPI merchant payments of ₹2,000 or less will not attract the new MDR. Many everyday UPI purchases will therefore remain unaffected.
6. How much is the UPI charge on a ₹5,000 payment?
For an eligible merchant transaction, the MDR at 0.4% would be ₹20. However, this is a merchant-side charge within the payment ecosystem and is not a new ₹20 fee that the customer has to pay directly.
7. When will the new UPI charges start in India?
The new UPI MDR framework will come into effect on October 15, 2026. It will apply to specified merchant transactions above ₹2,000, while person-to-person transfers and exempt transactions will remain outside the new MDR.
