UPI will charge merchants 0.4% on payments above ₹2,000 from 15 October

From 15 October 2026, most Indian merchants will pay a 0.4 percent fee on Unified Payments Interface receipts above ₹2,000. The National Payments Corporation of India set the rate in a circular issued on 15 September. Customers will not be charged. Person-to-person transfers stay free at every value.

The fee is a merchant discount rate paid by the shop or firm to its acquiring bank. NPCI has barred merchants from adding it as a line item on the customer’s bill and has barred UPI apps from levying a platform charge of their own.

On a ₹3,000 sale the merchant pays ₹12. On ₹5,000 the fee is ₹20. On ₹50,000 it is ₹200. Once a single payment hits ₹75,000 the 0.4 percent calculation is cut off at ₹300. A ₹1 lakh receipt therefore costs the merchant ₹300, not ₹400.

Who is left out

The Finance Ministry says about 96 percent of person-to-merchant UPI payments will not attract the new rate. Two large groups sit outside it.

First, every payment of ₹2,000 or less. NPCI says those tickets already make up more than 95 percent of merchant UPI volume.

Second, small merchants who collect up to ₹1 lakh a month on UPI QR codes. Rural and semi-urban QR payments in that bracket also stay at zero.

Person-to-person transfers are a third carve-out. The ministry put them at 37 percent of UPI volume and 70 percent of UPI value. Those rails do not change.

A fourth group pays something, but not 0.4 percent. Railways, telecom, insurance, fuel and agricultural inputs will pay a flat ₹5 on each merchant receipt above ₹2,000. Capital-market payments such as mutual-fund and broking settlements will pay 0.02 percent, also capped at ₹300.

Why the government moved now

UPI processed tens of billions of free merchant payments after the government and the Reserve Bank kept merchant discount rates at zero to drive adoption. Banks and the Payments Council of India have argued for years that the subsidy could not last. The new schedule is the first official price on large merchant traffic.

Officials say the money will go into rails, uptime, fraud controls and cyber security. They also say the 0.4 percent rate is still cheaper than the cards it is meant to sit beside. Debit-card merchant fees can run up to 0.9 percent. Credit-card merchant fees commonly sit between 1.5 and 2.5 percent.

That comparison is the government’s main public defence. A kirana that takes a ₹3,000 UPI payment pays ₹12. The same sale on a credit card could cost several times that figure.

Where the fight is

Opposition parties have called the fee a tax on digital payments. Congress leader Rahul Gandhi demanded a rollback and said the charge would be passed on in prices even if the circular forbids a separate line on the bill. A petition in the Supreme Court has challenged the levy on merchant payments above ₹2,000.

Fuel retailers have asked for an exemption from even the flat ₹5. Pump operators say their retail margins are already thin and that they may stop accepting larger UPI tickets if they have to absorb the fee. The request matters because fuel is one of the specified sectors that was given the flat rate precisely to keep those payments on UPI.

The political argument has a parliamentary footnote. Government sources said five Congress MPs sat on a panel that backed an MDR framework and recorded no dissent. The party has still made the charge a floor issue. The gap between committee language and campaign language is now part of the story.

What merchants will actually do

The circular says the cost cannot be added at the till. In practice a restaurant, clinic or retailer that lives on tickets above ₹2,000 can raise list prices by a few rupees and keep the till clean. A small QR merchant under the ₹1 lakh monthly cap has no new cost and no reason to change.

The design therefore splits the market. Everyday tea, grocery and bus tickets stay free. Larger urban retail, private healthcare, education fees and organised trade start to look a little more like card payments, with a ceiling that stops the fee growing without limit on very large tickets.

Banks and payment companies get a revenue line they have wanted since UPI became the default. The open question is whether that line is large enough to fund the next round of capacity without pushing organised merchants back toward cash or cards on the tickets that now cost them money.

The calendar is fixed. The rate starts on 15 October. Until then every current UPI merchant payment, at every value, remains free.