New Delhi: UPI has become a routine part of everyday payments in India, with QR codes now widely used by shops, street vendors and other small businesses. Amid this growing use, questions have emerged over whether users will have to pay a charge when making UPI payments above ₹2,000.
The latest government clarification makes an important distinction: UPI users will not be charged for sending money, even when the amount is above ₹2,000. However, a Merchant Discount Rate (MDR) will apply to certain person-to-merchant (P2M) transactions above ₹2,000 under the new framework.
Will UPI Users Pay a Charge Above ₹2,000?
No. According to the Ministry of Finance, customers will not have to pay MDR when making UPI payments.
Person-to-person (P2P) UPI transactions will remain completely free regardless of the amount transferred. This means sending money to another individual through UPI will not attract a transaction charge.
Payments made to merchants up to ₹2,000 will also remain free of MDR.
What Changes for Merchant Payments?
The new framework applies MDR to specified P2M transactions above ₹2,000. The government has clarified that MDR is a charge within the merchant payment ecosystem and is not a tax or a fee collected directly from UPI users.
Under the framework, a nominal MDR of 0.4% will apply to specified merchant transactions above ₹2,000. For transactions of ₹75,000 or more, the MDR will be capped at ₹300 per transaction.
Certain essential sectors, including railways, telecommunications, insurance, fuel and agricultural inputs, will instead have a flat MDR of ₹5 for transactions above ₹2,000. Capital-market-related transactions have a separate MDR structure.
Small Merchants Continue to Get Protection
The framework also provides a zero-MDR arrangement for eligible small merchants.
The government says small merchants receiving up to ₹1 lakh per month through UPI QR codes under the specified P2PM category will continue to enjoy zero MDR on their transactions. This includes many street vendors and neighbourhood businesses.
The Ministry of Finance has stated that around 96% of merchant transactions will remain unaffected, while MDR will apply to about 4% of merchant transactions.
What Does This Mean for Everyday UPI Payments?
For customers, the immediate point is that UPI charges above ₹2,000 do not mean customers will be asked to pay a separate fee.
The distinction between a customer charge and MDR is important. MDR operates within the payment ecosystem and is distributed among participating banks, payment service providers and UPI application providers. Banks have been advised not to allow merchants to pass MDR charges on to customers.
UPI continues to play a major role in India’s digital payment system. NPCI data shows that UPI processed more than 24.5 billion transactions in August 2026, with a transaction value of about ₹29.82 lakh crore.
The issue has also generated discussion among financial professionals, including Trinath Lenka, who pointed to the widespread use of UPI QR codes among everyday businesses.
For users, however, the latest official clarification is straightforward: UPI charges above ₹2,000 apply to specified merchant transactions through MDR, not as a direct payment charge on customers. Person-to-person UPI payments remain free, irrespective of the amount transferred.
