Skip to content
UPI QR Code
News

UPI Merchant Fee of 0.4% Above ₹2,000: What Shopkeepers Need to Know

5 min read
Share:
UPI Merchant Fee of 0.4% Above ₹2,000: What Shopkeepers Need to Know

A 0.4% fee on UPI payments to merchants above ₹2,000 has been notified, and NPCI's FAQ says it takes effect from 15 October 2026. Person-to-person transfers, merchant payments up to ₹2,000 and small merchants collecting up to ₹1 lakh a month on UPI QR stay free. Whether the 15 October start will actually hold is unclear as of 13 October 2026.

Last checked: 13 October 2026. We will update this post when NPCI or the government confirms the start date.

1. What has been announced

The fee is called MDR (merchant discount rate). It is a charge inside the payment system, not a tax. The Press Information Bureau (PIB) release of 15 September 2026 says: "MDR is neither a tax nor a charge collected by the Government or NPCI." It is shared among banks, payment service providers and UPI apps.

According to The Hindu BusinessLine, NPCI decided on 14 September to levy the MDR, and the Finance Ministry outlined the rates the next day and stated they would come into effect from 15 October. The framework was brought in under the Payment and Settlement Systems Act, 2007.

2. What stays free

PIB lists three things that remain free of MDR:

  • All person-to-person (P2P) transfers, whatever the amount.
  • Merchant payments up to ₹2,000. The fee applies only above ₹2,000.
  • Small merchants receiving up to ₹1 lakh per month through UPI QR codes under the "P2PM" category.

PIB says the fee will apply to only about 4% of merchant transactions.

3. What is charged, and how much

PIB gives these rates for merchant payments above ₹2,000:

Type of paymentFeeExample
Merchant payment up to ₹2,000Nil₹1,500 bill: ₹0
Merchant payment above ₹2,0000.4%₹20,000 bill: ₹80
Merchant payment of ₹75,000 and above0.4%, capped at ₹300₹1,00,000 bill: ₹300
Railways, telecom, insurance, fuel, agricultural inputs (above ₹2,000)Flat ₹5₹3,000 fuel bill: ₹5
Mutual funds, securities, stockbrokers and dealers0.02%, capped at ₹300₹50,000 payment: ₹10
Small merchant in the P2PM categoryNilAny amount, within the monthly limit

The arithmetic: 0.4% of ₹20,000 is 20,000 × 0.4 ÷ 100 = ₹80. 0.4% of ₹75,000 is exactly ₹300, so the cap starts there. On ₹1,00,000 the plain 0.4% would be ₹400, but the cap holds it at ₹300. 0.02% of ₹50,000 is ₹10.

These figures are the MDR alone. Zee Business reported on 8 October that GST of 18% currently applies on the MDR amount, and that the GST Council has discussed cutting it to 5%. On the ₹80 example, 18% GST would be a further ₹14.40. Ask your bank or accountant how this applies to you.

4. Who actually pays

The merchant. The NPCI FAQ, as reported by SCC Online, describes the charge as "MDR Paid by Merchant". PIB says customers will not pay it: "Banks have been advised to ensure that merchants do not pass MDR charges on to customers. UPI application providers are expressly prohibited from imposing platform fees or hidden charges."

So a customer should not see a surcharge on the same bill. As a shopkeeper, do not add a "UPI fee" to the bill. The sources say it is not allowed.

5. Are you in the free small-merchant category?

The NPCI FAQ says P2PM is an account category for small vendors who receive payments directly into their own personal bank accounts. Those receiving up to ₹1 lakh per month through UPI QR codes get zero MDR. Registering for GST is not required to qualify. A payment above ₹2,000 does not make a P2PM merchant liable to pay.

The FAQ also says banks run a "transaction velocity check" on P2PM merchants. Merchants with inward UPI credit above ₹1 lakh per month for three months in a row are moved to the P2M category, where the fee applies.

What is not yet clear from the sources we read: exactly which accounts a bank will treat as P2PM, and how a business account with a merchant QR is classified. Ask your bank directly.

Your QR does not need changing. The FAQ says existing QR stands and soundboxes will keep working and merchants do not need to re-register them.

6. Will it start on 15 October? The position as of 13 October 2026

The announced start date is 15 October 2026. Reports since then point both ways, and we have found no official NPCI or government statement changing it:

  • Times of India, 8 October, citing Reuters, reported that the government may postpone the start to January 2027, according to a regulatory official and an industry executive.
  • Free Press Journal, 10 October, citing Moneycontrol, reported that a UPI Steering Committee meeting did not take place on 9 October and that NPCI was reportedly examining proposals to defer to January 2027.
  • The Hindu BusinessLine, 12 October, reported that a senior NPCI official said they were unaware of any possible deferment. Asked whether the fee would then start on 15 October, the official declined to comment.

The same BusinessLine report says the Supreme Court did not stay the fee when it heard a public interest petition on 28 September. The matter is listed for 2 November.

We are not predicting an outcome. Check NPCI and the Finance Ministry before the 15th.

Frequently Asked Questions

Will I pay extra when I send money to a friend?

No. PIB says all person-to-person UPI transfers stay free, whatever the amount.

I run a small shop. Will I pay 0.4% on every sale?

Not on sales up to ₹2,000. Above that, the fee applies unless you are in the free small-merchant (P2PM) category, which covers up to ₹1 lakh a month received through UPI QR codes.

Can I charge the customer the fee?

According to PIB, no. Banks have been advised to ensure merchants do not pass MDR on to customers, and UPI apps may not add platform fees.

Does the daily UPI limit matter here?

PIB says daily limits are safety measures and "are not charging thresholds". See our guide to UPI transaction limits.

Checklist for shopkeepers

  • Add up your monthly UPI QR collections from your bank statement or app.
  • Ask your bank which category your account falls under: P2PM (free) or P2M (fee above ₹2,000).
  • Note how many of your bills are above ₹2,000; only those can attract the fee.
  • Work out the fee on your usual large bills using the table above.
  • Do not add a surcharge to customers' bills.
  • Keep your current QR. No replacement is needed, according to the NPCI FAQ.
  • Check NPCI and the Finance Ministry for the final start date.

New to all this? Read what UPI is or how to create a UPI QR code for your business. This post is general information, not legal or tax advice.

Sources

Whatever the final date, a clean QR code helps you get paid. Make one free in seconds with our UPI QR code generator.

U

Written by

UPI QR Admin

Visit author website →

Related Articles

← All articles