Archive · 23 Sep 2026
UPI MDR Introduces Fees, Reviving Debate Over Transaction Tax
UPI payments were described as free for everyone.
A new rule says that only payments up to Rs 2,000 are covered as free UPI.
From 15 October, some merchants must pay a small fee when they receive larger UPI payments.
The fee is 0.4 percent and cannot be more than Rs 300.
Some payments, such as railway and fuel payments, have a flat Rs 5 fee.
Small QR-code merchants and transfers between individuals do not have to pay this fee.
The Finance Ministry had earlier promised not to charge for UPI and denied reports of such a fee.
The government will not roll back the charges, while the Opposition describes them as a UPI tax.
A 14 September gazette notification redefined “free UPI” to cover payments only up to Rs 2,000.
From 15 October, merchants receiving over Rs 2,000 through UPI must pay a 0.4 percent MDR, capped at Rs 300.
A flat Rs 5 fee applies to railway, fuel, telecom, and insurance payments.
Small merchants receiving up to Rs 1 lakh monthly through QR codes and person-to-person transfers remain exempt.
The government says the charges will remain, while the Opposition calls them a “UPI tax.”
- Who
- The government, merchants using UPI, the Finance Ministry, and the Opposition.
- What
- New UPI Merchant Discount Rate charges were announced for certain merchant payments.
- When
- The gazette notification was issued on 14 September, and the new rates begin on 15 October; the article also cites statements from August 2022 and June 2025.
- Where
- The policy applies to UPI payments; the article does not specify a narrower location.
- Why
- The articles do not state the government’s policy rationale; the Opposition objects to the charges and calls them a UPI tax.
Government and Policy Position
Opposition and Critical View
Whether UPI remains free
Government and Policy Position
The new framework limits free UPI coverage to payments up to Rs 2,000, while retaining exemptions for small QR-code merchants and person-to-person transfers.
Opposition and Critical View
The Opposition calls the new charges a “UPI tax,” arguing that the policy contradicts earlier assurances that UPI would remain free.
Whether the charges should continue
Government and Policy Position
Officials say the MDR will not be rolled back.
Opposition and Critical View
The article’s author and the Opposition oppose the charges, with the author characterizing MDR as a bank transaction tax.
Earlier government assurances
Government and Policy Position
In August 2022, the Finance Ministry described UPI as a “digital public good,” and in June 2025 said reports of an MDR were “completely false, baseless, and misleading.”
Opposition and Critical View
Critics point to those earlier statements as evidence that the newly announced fees represent a reversal of the government’s previous position.
- Notification date
- 14 September
- MDR start date
- 15 October
- Merchant rate
- 0.4 percent for UPI receipts above Rs 2,000
- MDR cap
- Rs 300
- Flat fee
- Rs 5 for railway, fuel, telecom, and insurance payments
- Small-merchant exemption
- QR-code merchants receiving up to Rs 1 lakh per month
- Person-to-person transfers
- Remain free