New Delhi: The government has clarified that users making payments through the Unified Payments Interface (UPI) will not be charged any transaction fee. This means common people will continue to send money and make payments through UPI without paying any additional charges.
The government has also made it clear that all Person-to-Person (P2P) UPI transactions, or payments made from one individual to another, will remain free.
No Charge on Every UPI Transaction for Merchants
The government has also clarified that merchants will not be charged on every UPI transaction. If Merchant Discount Rate (MDR) is introduced in the future, it will apply only to certain categories of merchant transactions and above a specified threshold.
The MDR rate, if introduced, is expected to be nominal and significantly lower than the rates applicable to debit and credit card transactions. In simple terms, shopkeepers will not have to pay a charge on every UPI payment they receive.
According to the government, the majority of merchant UPI transactions will continue to remain free.
Who Will Decide the MDR?
According to the government, after the passage of the Taxation and Other Laws (Amendment) Bill, 2026, the way will be cleared for amendments to Section 10A of the Payment and Settlement Systems Act, 2007.
If MDR is introduced in the future, the UPI and Services Steering Committee, chaired by the National Payments Corporation of India (NPCI), will decide the applicable MDR rate and the transactions on which it will be imposed.
Why Was a Change in the Law Needed?
The government has clarified that the amendment to the Payment and Settlement Systems Act is not intended to impose UPI charges on ordinary users.
Instead, it is being described as an enabling provision aimed at making the UPI ecosystem financially sustainable and stronger in the long run.
With UPI transactions increasing continuously, the government says there is a growing need to strengthen cybersecurity, prevent fraud and regularly upgrade the technological infrastructure supporting the payment system.
The government also believes that greater participation by companies and increased competition will be important for the continued expansion of UPI. A sustainable model is therefore needed to ensure that the system remains robust and capable of supporting future growth.
Government Says Subsidies Alone Are Not Enough
The government has said that relying solely on subsidies may not be a sustainable solution for the next phase of UPI’s development.
Therefore, there is a need for a balanced model that can keep UPI strong, secure, competitive and financially sustainable while continuing to provide free access to ordinary users.
Government Rejects Claims of External Pressure
Amid reports and speculation about possible UPI charges, questions were also raised over whether the policy was influenced by external pressure.
The government has rejected such claims as baseless, incorrect and misleading.
It said that if external pressure had been a factor, UPI would not have been launched in 2016. The government also pointed out that since January 2020, UPI has been kept free for citizens and merchants and has grown into one of the world’s largest real-time interoperable payment systems.
What Has the Government Clarified?
In simple terms, the government’s position is:
- UPI will remain free for ordinary users.
- No charge will be imposed on Person-to-Person UPI payments.
- Merchants will not be charged on every UPI payment.
- If MDR is introduced in the future, it will apply only to selected merchant transactions above a specified threshold.
- The applicable MDR rate is expected to be nominal and lower than debit and credit card MDR.
- The objective is to keep UPI free for citizens while strengthening its cybersecurity, technology and long-term sustainability.
The government has reiterated that UPI is an Indian innovation and its commitment to keeping UPI free for ordinary citizens remains unchanged.
