"UPI charges 2026" has been one of the top finance searches in India since the framework for a Merchant Discount Rate on UPI was announced. The NPCI circular of 15 September 2026 settled the details: the fee starts on 15 October 2026. Person-to-person transfers remain free, small merchants remain free, and the fee for other merchants is modest. But if your business receives more than ₹1 lakh a month via UPI QR, your settlement reports will carry a new line from mid-October.
The framework in one table
| Transaction | MDR |
|---|---|
| P2P (individuals) | 0% |
| P2PM small merchant (≤ ₹1 lakh/month UPI QR receipts) | 0% |
| P2M merchant, ticket ≤ ₹2,000 | 0% |
| P2M merchant, ticket > ₹2,000 | 0.4%, capped at ₹300 per transaction (cap reached at ₹75,000) |
| Fuel, railways, telecom — ticket > ₹2,000 | Flat ₹5 per transaction |
| Credit card / credit line on UPI | Card-style MDR (typically 1–2%) |
GST at 18% applies on the MDR amount. See the detailed UPI MDR 2026 guide for background; this article is about what to do.
What it costs in practice
Take a mid-size electronics shop doing ₹15 lakh a month over UPI with an average ticket of ₹6,000:
- 250 transactions × ₹6,000
- MDR per transaction: 0.4% × 6,000 = ₹24
- Monthly MDR: ₹6,000 + 18% GST = ₹7,080
That is 0.47% of UPI sales — roughly a quarter of what card acceptance costs and less than the cost of counting, storing and depositing cash. Run your own numbers in the UPI MDR calculator.
Five moves to make now
1. Find out how NPCI classifies you
Your PSP (Paytm, PhonePe for Business, BharatPe, Razorpay, your bank) knows whether you are P2PM or P2M. Ask. If your UPI QR receipts are genuinely under ₹1 lakh a month but you were onboarded as a full merchant, request reclassification before 15 October.
2. Read your settlement report line by line
From the first cycle after MDR applies, look for "MDR", "convenience fee" or "platform fee" plus a GST line. Some PSPs quietly add their own margin on top of the NPCI rate. If the effective rate is above 0.4% + GST on large tickets, negotiate or switch.
3. Claim the GST as input credit
The 18% GST on MDR is a business expense with ITC. Ask your PSP for a monthly GST invoice with your GSTIN. Over a year this is real money.
4. Do not surcharge customers
NPCI rules prohibit passing UPI MDR to customers as a separate charge. Price it into margins like any other cost. A "2% extra for UPI" sign is both a rule violation and a sales killer.
5. Keep static QR for small tickets
Transactions up to ₹2,000 are free for every merchant. NPCI has said splitting a ₹6,000 bill into three ₹2,000 payments to dodge the fee is not permitted and will be monitored. For a mixed-ticket business, a counter standee for small purchases costs nothing. Print one with the UPI standee tool; use dynamic invoice QRs for larger bills so the amount is exact.
What about credit on UPI?
RuPay credit cards and credit lines on UPI carry card-style MDR (1–2%) and have since launch. If a customer pays a ₹50,000 bill with a RuPay credit card via UPI, expect ~₹500–1,000 in fees, not ₹300. Your PSP report will show these separately.
Should you push customers back to cash?
No. Cash has hidden costs — handling time, theft risk, counterfeit notes, deposit trips, and the compliance headache of large cash sales (Section 269ST caps cash receipts at ₹2 lakh per transaction). A 0.4% fee on tickets above ₹2,000 is cheaper than all of that.
FAQ
I run a kirana store receiving ₹70,000 a month over UPI. Do I pay MDR?
No. Merchants receiving up to ₹1 lakh a month via UPI QR are P2PM small merchants and remain zero-MDR under the NPCI circular.
Is the ₹300 cap per transaction or per day?
Per transaction. A ₹1 lakh payment attracts ₹300 (plus GST), not ₹400.
Can I claim GST input on the MDR?
Yes, provided your PSP issues a tax invoice in your business name with your GSTIN.
Will the threshold or rate change?
The framework is set by NPCI circulars and can be revised; a Supreme Court petition against the levy is pending and the government has ruled out a rollback. Check your PSP's fee schedule each quarter.