Concerns over UPI charges have grown after the Government of India introduced the Taxation and Other Laws (Amendment) Bill, 2026, which could allow a fee on certain UPI transactions. However, Finance Minister Nirmala Sitharaman has clarified that if such a fee is introduced, it will not be charged to end users.
The clarification came after reports suggested that UPI payments above Rs. 2,000 could attract charges. According to the Finance Minister, the proposed fee is a Merchant Discount Rate (MDR), which applies only to merchants and not to customers making digital payments.
Government Explains Proposed UPI Charges
In a post on X, Nirmala Sitharaman said that the proposed MDR should not be confused with a charge on consumers. She stated that the Merchant Discount Rate is meant for businesses that accept UPI payments and not for individuals using UPI apps.
The Finance Minister also said that no final decision has been taken. The proposal will only move forward after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, and the NPCI-led UPI and Services Steering Committee takes a final call.
The government believes that introducing MDR could help banks and fintech companies invest more in payment infrastructure, innovation, and security.
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Key points
- End users will not pay UPI charges if MDR is introduced.
- The proposed fee will apply only to merchants.
- No final decision has been announced yet.
- Parliament must first approve the amendment bill.
- NPCI's steering committee will take the final decision.
Who Could Be Affected and What Are the Proposed Charges?
Reports suggest that two proposals are currently being considered for UPI charges.
Proposed MDR models
- 0.3% to 0.5% MDR on UPI transactions above Rs. 2,000.
- Applicable to merchants with an annual turnover above Rs. 1.5 crore.
- Another proposal links the fee to a merchant's annual turnover instead of individual transaction value.
- The government may also introduce a maximum cap on MDR charges.
Although transactions above Rs. 2,000 account for only around 5% of total UPI transactions, they contribute nearly 65% of the overall transaction value, making them an important segment for payment providers.
Small shops and neighbourhood retailers are unlikely to be affected immediately, while larger businesses may bear the additional cost if the proposal is approved.
For consumers, nothing changes for now. Users can continue making UPI payments for shopping, bill payments, food delivery, travel bookings, and other daily expenses without paying any additional fee.
The proposed amendment only gives the government the legal authority to introduce MDR in the future. Until a final decision is made, UPI charges remain only a proposal, and regular users can continue using the payment system without any additional cost.
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