Government clarifies no UPI charges for users; MDR, if any, only for some merchant transactions
The Finance Ministry said on 8 August 2026 that UPI users will face no transaction charges and person-to-person payments will stay free, with any merchant discount rate limited to some merchant transactions above a threshold.
Summary
The Ministry of Finance clarified on 8 August 2026 that consumers making UPI payments will not face transaction charges and all person-to-person transactions will remain free. If merchant discount rate (MDR) charges are introduced, they will apply only to a limited set of merchant transactions above a threshold, at a nominal rate far lower than card MDRs. The Taxation and Other Laws (Amendment) Bill, 2026 proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007. Once it is passed, the NPCI-led 'UPI and Services Steering Committee' will decide on any MDR.
Key facts
- Users
- No transaction charges; P2P stays free
- Merchants
- MDR, if any, threshold-based and nominal
- Bill
- Taxation and Other Laws (Amendment) Bill, 2026
- Law amended
- Section 10A, Payment and Settlement Systems Act, 2007
- Decision body
- UPI and Services Steering Committee, headed by NPCI
Practice MCQs 3 questions
Which section of the Payment and Settlement Systems Act, 2007 does the Taxation and Other Laws (Amendment) Bill, 2026 propose to amend in relation to UPI charges?
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Correct answer: B — Section 10A
The Bill proposes to amend Section 10A of the PSS Act, 2007; the NPCI-led UPI and Services Steering Committee would then decide on any MDR.
According to the Finance Ministry's clarification of August 2026, which body will decide on any MDR on UPI once the amendment is passed?
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Correct answer: C — UPI and Services Steering Committee headed by NPCI
The 'UPI and Services Steering Committee', headed by NPCI, will decide on the MDR, if any.
Consider the following statements based on the Finance Ministry's UPI clarification of August 2026: 1. Person-to-person UPI transactions will continue to be free. 2. Any MDR introduced will be levied on all merchant transactions at a uniform rate. Which of the above is/are correct?
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Correct answer: A — 1 only
Only statement 1 is correct. Any MDR would be threshold-based and apply only to a limited set of merchant transactions, not to all.