UPI Stays Free
Larger merchants to bear MDR charges, sparing small businesses and consumers
Story timeline5 updates
MDR charges will apply only to a limited set of merchant transactions above a certain threshold at a nominal rate.
Rajya Sabha clears Taxation and Other Laws Amendment Bill 2026.
Finance Ministry clarified MDR, if introduced, will apply only to merchant transactions above a specified threshold at a nominal rate, not all UPI payments.
Government states MDR, if introduced, will apply only to merchant transactions above a specified threshold at a nominal rate, with all P2P UPI transactions remaining free.
Story published. Larger merchants to bear MDR charges, sparing small businesses and consumers
PhonePe and Razorpay executives have confirmed that Unified Payments Interface (UPI) transactions will remain free for all consumers in India. The clarification follows parliamentary approval of a bill permitting merchant discount rate (MDR) charges on digital payments.
PhonePe CEO Sameer Nigam stated that UPI is and will continue to be free for Indian consumers, with no charges for making payments. The Payments Council of India (PCI) also clarified that UPI would remain free for consumers and small merchants, who will not be required to pay MDR for accepting payments. Any MDR charges, where applicable, will be imposed on merchants under commercial agreements with payment service providers, not on consumers.
The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, which allows the government to reintroduce MDR charges on UPI transactions. However, the government’s incentive scheme reimburses banks for eligible low-value UPI transactions made to small merchants, helping offset processing costs. Larger businesses may face merchant charges, while small merchants remain exempt.
UPI has been free for consumers since its launch in 2016, and the government has consistently maintained this stance. Industry leaders, including those from PhonePe and Razorpay, support sustainable revenue models where businesses, not consumers, bear any applicable charges.
