UPI charges from 15 October 2026: what changes for you, and what doesn’t
A 0.4% merchant fee now applies to some UPI payments above ₹2,000. Here is who pays it, which payments stay free, and what to watch in your own spending.
From 15 October 2026, a merchant discount rate (MDR) applies to some UPI payments for the first time. The headlines made it sound like UPI is no longer free. For most people paying with UPI, nothing changes at the till. Here is what the new framework covers, based on NPCI's published FAQs and coverage of them.
The short version
- Paying a friend or family member (P2P) stays free, whatever the amount.
- Paying a shop up to ₹2,000 stays free for the shop too. NPCI says these small payments are more than 95% of all UPI merchant payments.
- Above ₹2,000, the shop pays a fee, not you: 0.4% of the amount, capped at ₹300 for payments of ₹75,000 and above.
- Some categories pay a flat ₹5 per payment above ₹2,000: railways, telecom, insurance and fuel.
- Mutual fund and stockbroker payments carry a much smaller 0.02% fee, also capped at ₹300.
- Very small merchants who receive up to ₹1 lakh a month through a UPI QR straight into their account keep paying nothing.
Who actually pays?
MDR is charged to the merchant by their bank, the same way card payments have always worked. You should not see an extra line on your payment. Reports quote the government saying the charge is for merchants to bear, not to pass on.
That said, a shop that pays a fee on a ₹5,000 payment (₹20 at 0.4%) may start nudging you towards cash for bigger bills, or ask for a "convenience fee". If you see a surcharge added for paying by UPI, ask about it, and keep a note of it in your expense tracker so you can see whether it is becoming a habit at one place.
Worked examples
- ₹1,800 grocery bill: no fee for anyone.
- ₹3,000 restaurant bill: the restaurant pays ₹12.
- ₹50,000 laptop: the store pays ₹200.
- ₹90,000 phone: the store pays the ₹300 cap.
- ₹6,000 to a friend for a trip: free, because it is person to person.
Why it is happening
Banks and UPI apps have run UPI at almost no revenue for years while it grew to billions of payments a month. The new fee is split between the customer's bank, the merchant's bank, the UPI app and its partner bank. The aim is to keep the system funded without charging the people who pay.
What to do as a user
- Nothing, for everyday payments. Your small UPI payments work exactly as before.
- Watch for surcharges on big purchases. A shop adding 1–2% "for UPI" is charging you more than its actual fee.
- Keep using UPI for large bills where it is accepted. It is still free for you and leaves a clear record.
- Check the source for exact rules. Fee schedules change; NPCI's notices and your bank's announcements are the final word.
Keep an eye on where your UPI money goes
UPI makes spending effortless, which is exactly why it is easy to lose track. Dhuddu reads the payment alerts your bank sends to Gmail and turns them into entries, so your UPI spending shows up by category without typing. Transfers to your own accounts and card bill payments are kept out of spending, so the totals reflect what you actually spent.
Sources: SCC Online summary of NPCI's UPI MDR FAQs, Entrepreneur India, Zee Business. This post explains the rules as published at the time of writing and isn't financial advice; check NPCI and your bank for the latest.