Govt Clarifies UPI Charges: Person-to-Person Transactions to Remain Free, Limited MDR May Apply to Merchants:

The Government of India is planning to amend Section 10A of the Payment and Settlement Systems Act, 2007. In the same context, the Taxation and Other Laws (Amendment) Bill, 2026, has been introduced in the parliament.

Upon successful passing of this bill, the "UPI and Services Steering Committee" headed by NPCI will decide whether MDR should be introduced and, if so, how it will apply. The government has clarified that UPI users will not have to pay transaction charges. Person-to-person (P2P) UPI transactions will continue to remain completely free.

It has further been clarified that merchants will not face blanket charges on UPI transactions. If a Merchant Discount Rate (MDR) is introduced in the future, it will apply only to a limited number of merchant transactions above a specified threshold. The rate is expected to be nominal and lower than the MDR generally charged on debit and credit card transactions. The vast majority of merchant UPI transactions will continue to remain free.

The clarification comes after an amendment to the Payment and Settlement Systems Act, 2007 (PSS Act), led to concerns that UPI charges could be imposed on ordinary users. The government said the amendment is only an enabling provision aimed at ensuring the long-term sustainability, security, and development of the UPI ecosystem.

The government said UPI needs continuous investment in cybersecurity, fraud prevention, infrastructure, and technology as transaction volumes continue to grow. It also wants to encourage more companies to participate in the digital payments ecosystem and reduce dependence on government subsidies.

UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone. It is now live in 11 foreign countries and continues to expand internationally. The government reiterated that UPI will remain free for citizens and urged people to rely only on official information from the Ministry of Finance, RBI, and NPCI.