New UPI Rules 2026: Charges, Exemptions and What Changes for You

# New UPI Rules 2026: Charges, Exemptions and What Changes for You

**Published by CNSD Finance | Updated: 16 September 2026**

Will you have to pay extra when you scan a QR code? Will transferring money to your family attract a charge? What do the new UPI rules mean for shopkeepers?

The latest government announcement has raised questions about everyday digital payments.

**UPI remains free for consumers. The announced changes introduce Merchant Discount Rate (MDR) on selected merchant transactions.** MDR is a payment-processing charge, not a new government tax. [Source: Ministry of Finance] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2310586&lang=1&reg=48

Here is what individuals and business owners should understand.

## When Will the New UPI Rules Apply?

The official FAQs published on 15 September 2026 specify **15 October 2026** as the effective date.

As of this article’s publication, the framework has been announced but has not yet taken effect. This distinction matters when reading headlines or messages claiming that charges have already started. [Source: Government MDR FAQs] https://financialservices.gov.in/sites/default/files/2026-09/FAQs---Merchant-Discount-Rate--MDR--on-Select-UPI--P2M--Transactions_0.pdf

## What Is MDR?

Merchant Discount Rate is the fee associated with accepting certain digital payments. Under the announced framework, eligible businesses bear this payment-processing cost.

For readers, the key questions are:

* Is this a personal transfer or a merchant payment? * Does the merchant qualify for an exemption? * Which payment category applies? * Has the effective date arrived?

Looking at the amount alone does not answer all these questions.

## Which UPI Transactions Remain Free?

The Ministry of Finance confirms that:

* **Person-to-person transfers remain free.** * **Merchant payments of ₹2,000 or less attract zero MDR.** * **Eligible P2PM small merchants receiving up to ₹1 lakh monthly through UPI QR codes retain zero MDR.**

Consumers should not bear the merchant’s MDR. Banks have been advised to prevent merchants from passing it on, and UPI apps may not impose platform or hidden charges for UPI payments. [Source: Ministry of Finance] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2310586&lang=1&reg=48

## What Are the Announced Merchant Charges?

| Payment category | Announced MDR | | -------------------------------------------------------------------------------- | ------------------------------------- | | Standard, non-exempt merchant payments above ₹2,000 | 0.4%, capped at ₹300 per transaction | | Specified sectors, including railways, telecom, insurance and fuel, above ₹2,000 | Flat ₹5 per transaction | | Capital-market payments | 0.02%, capped at ₹300 per transaction |

The applicable treatment depends on the merchant and transaction category. These rates should not be interpreted as a universal charge on every UPI payment. [Source: Ministry of Finance](https://www.pib.gov.in/PressReleasePage.aspx?PRID=2310586&lang=1&reg=48).

## A Simple Calculation for Business Owners

Assume a standard, non-exempt merchant transaction attracts the announced 0.4% rate.

| Payment received | Illustrative calculation | MDR | | ---------------- | -------------------------------------- | ---- | | ₹5,000 | ₹5,000 × 0.004 | ₹20 | | ₹20,000 | ₹20,000 × 0.004 | ₹80 | | ₹1,00,000 | Percentage calculation exceeds the cap | ₹300 |

These examples show MDR alone, not a complete settlement statement. Ask your acquiring bank or payment provider to explain the applicable deductions and settlement treatment. [Rate and cap: Government MDR FAQs] https://financialservices.gov.in/sites/default/files/2026-09/FAQs---Merchant-Discount-Rate--MDR--on-Select-UPI--P2M--Transactions_0.pdf

## What Should Small Shopkeepers Check?

Receiving a payment above ₹2,000 does not automatically create MDR for a merchant covered by the P2PM exemption. Merchant classification matters. The official FAQs also state that existing QR infrastructure can continue operating. [Source: Government MDR FAQs] https://financialservices.gov.in/sites/default/files/2026-09/FAQs---Merchant-Discount-Rate--MDR--on-Select-UPI--P2M--Transactions_0.pdf

Before implementation, ask your payment provider:

1. Is my merchant account classified as P2PM or P2M? 2. Which exemption or rate applies to my business? 3. How will any deduction appear in my settlement report? 4. Who will resolve an incorrect charge?

Keep the answers in writing. After implementation, compare a sample of invoices, payment receipts and settlement entries.

For a business owner, understanding the settlement statement is just as useful as understanding the headline rate.

## Does Free UPI Mean Unlimited Transfer Amounts?

No. **Payment charges and transaction limits are separate.** Bank and NPCI security limits still apply. Free usage does not remove those safeguards. [Source: Ministry of Finance] https://www.pib.gov.in/PressReleasePage.aspx?PRID=2310586&lang=1&reg=48

Before making a large payment, check the current limit shown by your bank or payment app. Do not assume that another person’s limit will apply to your account.

## What If You See an Unexpected Fee?

Ask the merchant or payment provider to identify the charge and provide an itemised bill.

Keep:

* The transaction reference. * A screenshot of the fee message. * The invoice or payment receipt. * Any written response from support.

If the charge is described as a UPI processing surcharge, raise the issue through your bank or payment app’s official support channel.

Avoid relying on forwarded screenshots alone. Check the original announcement, publication date and effective date before changing how you make or accept payments.

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*This article provides general educational information based on the official sources linked above, checked on 16 September 2026. Confirm subsequent updates and account-specific treatment with your bank or payment provider.*