The government has confirmed that UPI payments will remain free for consumers and small merchants. The new merchant discount rate or MDR will apply only to certain business transactions above ₹2,000. These charges will be nominal and much lower than debit or credit card fees. Person to person transfers will not be affected, keeping UPI inclusive and affordable.
Finance Minister Nirmala Sitharaman introduced the Taxation and Other Laws Amendment Bill 2026 in Parliament. The bill empowers the government to levy MDR selectively. It was passed by voice vote after debate. The government stressed that UPI must stay cost effective and globally competitive. MDR will be limited and sustainable, not a blanket charge.
Small merchants will not pay for accepting UPI payments. Only larger transactions may attract MDR at rates between 0.25% and 0.4%. This is far below the usual card MDR. The National Payments Corporation of India and the UPI and Services Steering Committee will decide on implementation once Parliament gives approval.
For consumers, sending money through UPI will continue without extra cost. For merchants, small businesses remain protected while bigger transactions may face nominal charges. The move ensures UPI’s long term sustainability, expansion into rural areas and readiness for future risks.
