UPI Charges Above Rs 2,000 from 15 October: What Changes for You and Your Shopkeeper

Last verified: 20 September 2026. Rules notified 14-15 September 2026 and effective 15 October. A PIL against the framework is before the Supreme Court and has not yet been listed for hearing, so details can still move.

CardShala carries no referral links on this page and nobody paid for a mention. This is an explainer, not financial, tax or legal advice. Check with your bank or your CA before changing how you accept payments.

The short version

From 15 October 2026, a merchant who receives a UPI payment above Rs 2,000 pays a fee called MDR. The standard rate is 0.4%, capped at Rs 300 per payment.

You, the person paying, pay nothing extra. Sending money to friends and family stays free at any amount. Most small shops that collect up to Rs 1 lakh a month on a UPI QR pay nothing either.

The government says only about 4% of merchant payments by count will attract the fee. By value it is a much bigger slice: payments above Rs 2,000 are roughly two-thirds of merchant UPI money.

Where this rule actually comes from

Most of the confusion is because there is no single document that says “0.4% MDR”. It came in three steps.

Date	What happened	Document
Monsoon Session 2026	Parliament inserted Section 10A into the Payment and Settlement Systems Act, 2007, through the Taxation and Other Laws Amendment Act. It lets the Centre notify payment modes on which no charge may be levied.	Act of Parliament
14 Sep 2026	Ministry of Finance (Department of Financial Services) notified RuPay debit cards and UPI payments up to Rs 2,000 as charge-free. Anything above Rs 2,000 is outside that statutory protection.	Gazette notification S.O. 5067(E)
15 Sep 2026	NPCI issued the actual rate framework, plus an FAQ titled “Merchant Discount Rate (MDR) on Select UPI (P2M) Transactions”.	NPCI Circular NPCI/UPI/OC-No.237/2026-27

The Gazette notification does not contain the words “0.4%”. That number comes from the NPCI circular. Paytm’s stock-exchange filing on 15 September quotes the same circular number and confirms “MDR of up to 0.4%” on P2M payments above Rs 2,000, effective 15 October 2026.

On 16 September, advocate Anjan Datta filed a PIL in the Supreme Court challenging both the 14 September notification and the MDR framework, partly on the ground that the operative instrument was never published in the Gazette. No stay has been reported. Until one is, 15 October stands.

What MDR actually is

MDR stands for Merchant Discount Rate. It is the cut a shop gives up so the payment system can carry its money: the shop’s bank, your bank, the UPI app and NPCI.

You already know it from cards. When a shop says “2% extra on card”, that 2% is them trying to push their card MDR onto you. UPI and RuPay debit cards have had zero MDR since 1 January 2020. The government paid banks a subsidy instead. That zero period ends on 15 October for bigger payments.

Why now: NPCI and the Finance Ministry say running UPI costs the ecosystem around Rs 20,000 crore a year (servers, fraud checks, customer support), and the subsidy does not cover it. Finance Minister Nirmala Sitharaman said the fee will give banks and fintechs “greater capacity to invest in payment infrastructure, innovation, cybersecurity and fraud prevention.” The money stays with banks, apps and NPCI. It does not go to the government.

The rate card, slab by slab

Payment type	MDR from 15 Oct 2026
Person to person (you to a friend), any amount	Free
Payment to any merchant, up to Rs 2,000	Free
Payment to a merchant, above Rs 2,000	0.4%
Payment of Rs 75,000 or more	0.4%, capped at Rs 300
Railways, telecom, fuel, insurance (and some utilities)	Flat Rs 5 per payment above Rs 2,000
Mutual funds, stockbrokers	0.02%, capped at Rs 300
UPI AutoPay / mandates (SIPs, OTT, recurring bills)	Free
Small “P2PM” merchants taking up to Rs 1 lakh a month via QR	Free
RuPay credit card on UPI, bank credit lines on UPI	Not part of this framework

Why Rs 75,000? Because 0.4% of Rs 75,000 is exactly Rs 300. Above that, the fee stops growing.

The Rs 2,000 line is per payment. A Rs 2,000 payment attracts nothing. A Rs 2,500 payment attracts 0.4% on the full Rs 2,500, not just the Rs 500 above the line.

What changes for you as a normal user

Very little, on paper.

You pay the bill amount. Nothing more. NPCI says UPI stays free for consumers, and UPI apps cannot add platform fees for this.
Sending money to people stays free. Rent to your landlord’s personal UPI ID, money to your parents, splitting dinner with friends. No change at any amount.
Self-transfers stay free. Moving money between your own accounts is not a merchant payment.
SIPs, OTT and other AutoPay mandates stay free.
Merchants are not allowed to pass the fee to you. The 14 September notification bars a bank or system provider from imposing a charge “directly or indirectly” on a person making or receiving a protected payment. No “Rs 10 extra for UPI” at the counter.

What can change in practice:

Some shops may push you to cash on bigger bills. The Retailers Association of India has already warned that small merchants “will now think twice about whether to accept cash or UPI”, especially in the festive season.
Some may try to add a UPI surcharge anyway. That is not allowed. Ask them to show you the rule that says otherwise.
Some may ask you to split a Rs 4,000 bill into two Rs 2,000 payments. The official FAQs do not say whether this is allowed. Do not do it on the merchant’s instruction for big purchases where you need one clean receipt (warranty, returns, EMI claims).

If a merchant charges you extra for UPI

Pay the bill amount only and politely point out that MDR cannot be passed to customers. If they insist, raise a complaint through your UPI app’s help section and your bank. Finance ministry officials have said that from 15 October they will monitor on a daily basis whether merchants are passing the MDR to consumers, though they have not said what happens to a merchant who does, and NPCI has not published a dedicated channel for surcharge complaints.

Petrol pumps in Madhya Pradesh plan to stop UPI above Rs 2,000

On 19 September, the Madhya Pradesh Petroleum Dealers Association told news agency ANI that its members will stop accepting UPI payments above Rs 2,000 from 16 October. Its president, Ajay Singh, said pumps cannot absorb a 0.4% MDR because they make “only around 0.5 per cent profit”. Debit and credit cards will still be accepted.

But 0.4% is not the rate for fuel. Under the new framework, fuel is one of the special categories that pay a flat Rs 5 per UPI payment above Rs 2,000. On a Rs 3,000 fill, that is Rs 5, not the Rs 12 that 0.4% would come to. On a Rs 5,000 fill, it is still Rs 5, not Rs 20. We have not been able to open NPCI’s own FAQ document to check this line ourselves. Three separate reports of that FAQ all give fuel the flat Rs 5.

What to do at the pump:

Carry a backup if you fill up in Madhya Pradesh from 16 October: a debit card, a credit card or cash. Fills of Rs 2,000 or less are not part of the dealers’ announcement.
If you switch to a credit card, check your card’s fuel surcharge waiver. Many cards add a fuel surcharge, and the waiver usually has a minimum amount and a monthly cap.
Do not pay extra for UPI. If a pump still takes UPI but asks for more than the pump price, pay the pump price only. NPCI’s FAQ, as reported, says merchants cannot pass MDR on to customers.

What changes for merchants

This is where the real change is. The fee is cut from what lands in your account.

Three shops, three bills

A kirana store in a tier-2 town. Most bills are Rs 200 to Rs 1,500. None of those attract anything. The odd Rs 2,500 monthly-ration bill costs Rs 10 (Rs 2,500 x 0.4%), so the shop receives Rs 2,490. If total UPI collection stays under Rs 1 lakh a month and the shop is on the small-merchant (P2PM) QR, even that Rs 10 is waived.

An electronics or mobile shop. Say it sells 40 phones a month at Rs 15,000 each on UPI. That is Rs 6,00,000 in UPI receipts.

MDR: Rs 6,00,000 x 0.4% = Rs 2,400 a month
Over a year: Rs 28,800
If the shop’s margin is 8% (Rs 48,000 a month), the fee eats 5% of that margin

Those figures are illustrative, not a survey. Run them on your own sales. But that is the order of magnitude, and it is why these shops are the ones most likely to nudge you towards cash.

A two-wheeler or furniture dealer. A Rs 90,000 UPI payment would be Rs 360 at 0.4%, but the cap holds it at Rs 300. Big-ticket sellers pay proportionally less.

How this compares with cards

RBI’s December 2017 framework still governs debit-card MDR:

Payment mode	Merchant pays
UPI above Rs 2,000 (from 15 Oct 2026)	0.4%, Rs 300 cap
Debit card, small merchant (turnover up to Rs 20 lakh)	0.40% on POS/online, 0.30% on QR, Rs 200 cap
Debit card, other merchants	0.90% on POS/online, 0.80% on QR, Rs 1,000 cap
Credit card	No single RBI-prescribed rate. Negotiated between the network, issuer, acquirer and payment provider.

So UPI is still cheaper than a debit card for most merchants, and far more predictable than a credit card. It is just no longer free.

Who is fully exempt

P2PM (person-to-peer merchant) accounts receiving up to Rs 1 lakh a month through UPI QR codes. No GST registration is needed to qualify.
NPCI says it will check this with transaction velocity checks. A merchant that stays above Rs 1 lakh for three months moves out of the exempt category.
Payments of Rs 2,000 or less, for every merchant.

Special rates

Railways, telecom, fuel, insurance (reports also name utilities and agricultural inputs): flat Rs 5 per payment above Rs 2,000.
Mutual funds and stockbrokers: 0.02%, capped at Rs 300. On a Rs 50,000 investment that is Rs 10.
Educational institutions: concessional or capped rates. The exact figure is not yet public.

Is GST charged on top of the MDR?

Yes, and the government has now said so. GST applies to the MDR, the same way it applies to any other bank or payment charge. Government sources told news agency ANI on 17 September that “GST on UPI is a false rumour. It will be set off in Input tax credit.” In plain terms: the merchant pays GST on the fee and a GST-registered business can claim it back as input tax credit, so the real cost is the 0.4% plus a cash-flow gap until the credit comes through. There is no separate GST on your UPI payment as a customer. One report puts the rate at 18%, but no official document states a rate yet, and officials have indicated the GST treatment may go to the next GST Council meeting. Ask your acquiring bank how it will appear on your settlement statement.

What a merchant should do before 15 October

Check which category your QR is in. Ask your bank or payment app whether you are on a P2PM (small merchant) QR or a regular merchant QR. It decides whether you pay anything.
Pull last three months of UPI receipts. Add up payments above Rs 2,000 and multiply by 0.4%. That is your likely monthly fee.
Do not add a UPI surcharge. It is not permitted, and customers will walk.
Watch for your bank’s notice. The fee will be deducted by your acquiring bank. Check how it will show on your settlement statement, and ask whether GST is added.
Think twice before refusing UPI. The next section explains why.

What shopkeepers are actually saying

I spoke to two shop owners about this. Their answers were opposite, and both are reasonable.

The kirana owner shrugged. Most of his bills are a few hundred rupees, nothing near Rs 2,000, and on the handful that cross it the fee is Rs 10 or Rs 12. In his words, it is not a charge worth changing anything for. He will keep the QR up.

The other one said he will push customers to cash on bigger bills. He sells higher-ticket items, so a bigger share of his sales cross Rs 2,000, and he sees no reason to hand over 0.4% of them.

If you are in the second camp, know what the cash route actually costs you.

The cash limits people get wrong

Cash is not illegal. But there are hard limits, and the number most shopkeepers quote is the wrong one.

Section 269ST of the Income Tax Act: no person may receive Rs 2,00,000 or more in cash from one person in a single day, in a single transaction, or for a single event. Splitting it into several receipts from the same person on the same day does not help; they add up.
Penalty under Section 271DA: equal to the entire amount received. Take Rs 2.5 lakh in cash for one sale and the penalty is Rs 2.5 lakh, on the receiver, not the payer.
The Rs 20,000 figure that gets repeated is a different rule. Sections 269SS and 269T cap cash loans and deposits (including their repayment) at Rs 20,000, not shop sales.
Section 40A(3): a business expense paid in cash above Rs 10,000 in a day is disallowed as a deduction. That is money you spend, not money you take.

So a Rs 15,000 phone sale in cash is legal. A Rs 2.5 lakh sale in cash is not. And the softer costs of going cash-first are real: counting and bank trips, theft risk, GST questions on a mismatch between what you sell and what your account shows, and no digital record when you apply for a business loan. On a Rs 15,000 sale, the fee you are avoiding is Rs 60.

What this means if you use a RuPay credit card on UPI

NPCI’s FAQs say credit-linked UPI payments (RuPay credit cards on UPI, pre-sanctioned credit lines) are not covered by this new framework. They were already outside the zero-MDR regime and carry their own merchant charges.

In practice, nothing changes for you as a cardholder on 15 October. But keep this in mind: a shop that already refused your RuPay credit card on UPI will not suddenly accept it, and some shops may now refuse all UPI above Rs 2,000. Carry a backup.

Why RuPay credit cards sit outside this rule, what a merchant actually pays when you tap one, and why only RuPay (and no other network) is allowed on UPI at all, is a longer story than this post can carry. Tell me in the comments if you want it and I will write it up separately.

If you are choosing a card for UPI spends, a guide to lifetime-free RuPay credit cards is coming next, with the reward maths worked out. New to cards entirely? Start with the best credit cards for first-time users.

Where the money goes, and the politics

The fee is shared among the shop’s bank, the customer’s bank, UPI apps and NPCI.
NPCI says part of it will fund UPI expansion for small merchants in Tier 3 to 6 towns, the North-East, J&K, Ladakh and schemes like PM SVANidhi. The fund’s framework is to be finalised within three months, in consultation with RBI.
Congress leader Rahul Gandhi alleged the fee was brought in under US pressure. The Finance Ministry called that “patently false and misleading” and said only RuPay credit cards can be used for credit payments on UPI, so foreign card networks gain nothing.
In June 2025, the Finance Ministry had said there was no plan to levy MDR on UPI. This is a reversal, limited to payments above Rs 2,000.

FAQ

Will I be charged extra for paying by UPI from 15 October 2026?

No. The 0.4% MDR is paid by the merchant, and merchants are not allowed to pass it on to you. UPI apps cannot add platform fees for this either.

Is sending money to friends and family on UPI still free?

Yes. Person-to-person transfers are free at any amount, and so are transfers between your own accounts.

Is MDR charged on the full amount or only above Rs 2,000?

On the full amount. A Rs 2,000 payment attracts nothing. A Rs 2,500 payment attracts 0.4% of Rs 2,500, which is Rs 10, paid by the merchant.

What is the maximum MDR on one UPI payment?

Rs 300. The cap is reached at Rs 75,000, and anything larger still costs the merchant Rs 300.

Do small shopkeepers have to pay UPI MDR?

Not if they are on the small-merchant (P2PM) QR category and receive up to Rs 1 lakh a month through UPI QR. No GST registration is needed for this. A shop that stays above Rs 1 lakh for three months moves to the regular category.

Can a shop refuse UPI and insist on cash?

A shop can choose what it accepts. But it cannot receive Rs 2,00,000 or more in cash from one person in a day, in one transaction, or for one event. Section 271DA of the Income Tax Act sets the penalty at the full amount received.

Are SIPs and AutoPay payments affected?

No. UPI AutoPay mandates are exempt. Direct one-time payments to mutual funds and brokers carry a lower 0.02% rate, capped at Rs 300, paid by the fund house or broker.

Sources

Checked 19 September 2026. The fuel section and its sources were checked on 20 September 2026.

recent posts