Digital payment users in India have received an important clarification on UPI payment charges. Customers will not be required to pay a transaction fee when using UPI to make payments, including person-to-person transfers and eligible payments to merchants. The latest government clarification also states that UPI users will not be charged Merchant Discount Rate (MDR).
The clarification comes amid discussion over changes to the framework governing charges within the UPI ecosystem. The Ministry of Finance has stated that MDR is a merchant-side charge and is not a fee collected from customers making UPI payments.
UPI Payment Charges: What Customers Need to Know
For individuals sending money to another person through UPI, transactions will remain completely free, irrespective of the amount transferred, according to the latest government clarification.
This means customers can continue using UPI for person-to-person payments without paying a transaction fee, platform fee or other UPI-related charge.
The same principle applies when customers make eligible merchant payments. Payments to merchants of up to ₹2,000 will remain free of MDR, meaning customers will not have to pay an additional UPI transaction charge for these payments.
What About Payments Above ₹2,000?
The latest framework introduces MDR for specified merchant transactions above ₹2,000. However, this does not mean that customers will have to pay the MDR.
According to the Ministry of Finance, a nominal MDR of 0.4% applies to specified person-to-merchant transactions above ₹2,000. For transactions of ₹75,000 and above, the MDR is capped at ₹300 per transaction.
Certain essential sectors, including fuel, have a separate flat MDR provision for specified transactions above ₹2,000. The government has stated that these charges are part of the merchant payment ecosystem rather than a customer transaction fee.
Banks have also been advised to ensure that MDR is not passed on to customers. UPI application providers are prohibited from imposing platform fees or hidden charges on individuals for UPI transactions under the clarified framework.
UPI Remains Free for Person-to-Person Transfers
For everyday users, one of the clearest parts of the clarification concerns person-to-person payments.
Whether someone sends money to a family member, friend or another individual through UPI, the transaction will continue to remain free, according to the Ministry of Finance. There is no transaction-fee threshold for these P2P payments under the new framework.
The government has also stated that individuals will continue to have free usage without monthly quotas or tiered charges for UPI transactions. Transaction limits set by banks and NPCI for security and risk management are separate from charging rules.
What the New UPI Framework Means for Customers
The distinction between MDR and customer charges is important. MDR is a charge within the merchant payment ecosystem and does not represent a fee that customers have to pay when completing a UPI payment.
The Ministry of Finance said approximately 96% of merchant transactions will remain unaffected because they either fall below the ₹2,000 threshold or come under the zero-MDR framework for small merchants.
For customers, the practical takeaway is straightforward: UPI payment charges will not be added to their transactions simply because they use UPI. Person-to-person transfers remain free, while eligible merchant payments also continue without a customer transaction fee.
As UPI continues to be widely used for shopping, restaurant payments, fuel purchases and money transfers, users can rely on official information from the Ministry of Finance, RBI and NPCI when checking claims about new UPI charges. The government has specifically advised users to rely on official sources rather than unverified messages circulating online.
The latest clarification therefore separates merchant-side MDR from UPI payment charges for customers: users will not be required to pay MDR or a transaction fee for making UPI payments under the stated framework.
