UPI Charges from 15 Oct 2026: Will You Pay 0.4%? How to Check If You're a Small Merchant

If you searched UPI charges from 15 October, UPI 0.4% charge or UPI charges above ₹2,000, here is the short version.

From 15 October 2026, a Merchant Discount Rate (MDR) applies to some UPI payments made to businesses. MDR is a fee the merchant's bank collects from the merchant for accepting a payment. Customers don't pay it. Sending money to friends and family stays free. Most small shops and street vendors stay exempt too.

This guide is for shop owners, freelancers and customers. Every rule comes from an official document, named next to it with its date. Where the official text is silent, we say so.

Disclosure: General information only, not financial, tax or legal advice. SR Infobiz has no link to NPCI, any bank or any UPI app. We last re-checked the official documents on 3 October 2026.

Quick answer

Sources: Ministry of Finance press release (PIB), 15 Sep 2026; official MDR FAQ (Department of Financial Services), 15 Sep 2026, Q3, Q5, Q15–Q17 and Q34.

What changed, and why

Three official documents set out the new framework:

1. Gazette notification S.O. 5067(E), 14 Sep 2026: no bank or system provider may charge "a person making or receiving a payment" by RuPay debit card or UPI up to ₹2,000.
2. Ministry of Finance press release, 15 Sep 2026: sets the rates and says MDR "is neither a tax nor a charge collected by the Government or NPCI". It is shared among banks, payment providers and UPI apps.
3. Official FAQ, 15 Sep 2026: 42 questions and answers on rates, categories and the start date.

Why: the government says running UPI costs the industry about ₹20,000 crore a year, and MDR on larger merchant payments will help pay for it (FAQ Q10). It also says MDR will apply to only about 4% of merchant transactions (PIB, 15 Sep 2026).

Who pays and who doesn't

Customers: nothing extra.

1. No charge on customers at any amount (FAQ Q15)
2. UPI apps "shall NOT charge Platform Fee or any other charge" (FAQ Q17; PIB)
3. Scanning a shop's QR code is free for you, whatever the amount (FAQ Q19)
4. No monthly quota on free payments. Your bank's daily limits (often ₹1 lakh to ₹5 lakh) are security limits, not charges (FAQ Q20; PIB)

Person-to-person (P2P) transfers: free. Sending money to family, splitting a bill or moving money between your own accounts stays free at any amount (FAQ Q16; PIB).

AutoPay (UPI mandates): no MDR. Recurring AutoPay for utility bills, OTT subscriptions and SIPs carries no MDR (FAQ Q22).

Merchants: this is who MDR affects. It applies to person-to-merchant (P2M) payments above ₹2,000 received by merchants outside the small-merchant (P2PM) category. The merchant's bank (the "acquiring bank") collects it (FAQ Q3, Q35).

Credit on UPI: separate rules. Payments by a RuPay credit card on UPI or a bank credit line on UPI follow credit card rules, not this framework (FAQ Q36).

UPI MDR rates by category (from 15 Oct 2026)

Three things to note:

1. Exactly ₹2,000 is free. The gazette covers "UPI transactions upto Rs. 2,000", and the FAQ's own table shows ₹2,000 with ₹0 MDR. (Gazette, 14 Sep 2026; FAQ Q35.)
2. The ₹5 list isn't complete. The FAQ says "such as railways, telecom services, insurance, and fuel, among others" (Q33). Ask your bank which rate applies to your business category.
3. The capital-market rate may change. Business Standard reported on about 19 Sep 2026 that brokers had proposed a flat ₹5 instead. As of 3 Oct 2026, the official FAQ still says 0.02%, capped at ₹300.

The small-merchant (P2PM) rule, explained simply

What P2PM means: "Person-to-Person-Merchant" is an NPCI category for small vendors who receive UPI payments directly into their own bank account through a QR code. (FAQ Q24.)

The rule:

1. If you're classed as P2PM and receive up to ₹1 lakh a month through UPI QR codes, you pay zero MDR, even on single payments above ₹2,000. (FAQ Q23, Q24, Q26; PIB, 15 Sep 2026.)
2. GST registration is not required to get this exemption. Eligibility depends on your monthly UPI collections and how your bank classifies your account. (FAQ Q28.)
3. The 3-month rule: banks track the inflow. "Merchants with inward credit of UPI payment more than ₹1 lakh per month, consecutively for 3 months, are formally transitioned under P2M category." (FAQ Q29.)

What counts towards the ₹1 lakh? UPI payments received "through UPI QR directly into their accounts" (FAQ Q23). Experts quoted by Business Standard said cash and card receipts don't count (20 Sep 2026).

What if my UPI income drops back under ₹1 lakh?

The official documents don't say. The FAQ explains the move from P2PM to P2M (Q29), but neither it nor the press release says whether you can move back after falling under ₹1 lakh. Business Standard raised the same open question (20 Sep 2026).

Also not specified:

1. Whether months before 15 October 2026 count towards the three consecutive months
2. Whether MDR is charged during those three months, or only after the formal move to P2M

What to do: ask your bank or UPI app, and get the answer in writing.

How to check your status (the honest way)

There is no official public website or app where you type your UPI ID and see "P2PM" or "P2M". Banks and payment providers classify merchants and track the ₹1 lakh limit (FAQ Q29), so only whoever issued your QR code can tell you.

Step 1: Find who issued your QR. Your QR standee, sticker or soundbox usually shows the bank or app name.

Step 2: Ask these questions (copy and paste):

1. Is my UPI QR / VPA classified as P2PM (small merchant) or P2M?
2. What were my UPI QR collections for each of the last 3 months, as you count them for the ₹1 lakh limit?
3. From 15 October 2026, which MDR rate applies to my business category: 0.4%, ₹5 flat, or something else?
4. How will MDR be collected? Deducted from each settlement, or billed monthly? Will GST be added on top?
5. If my collections go above ₹1 lakh and later fall back under it, will I move back to P2PM?
6. Where in the app or statement will I see the MDR charged?

Step 3: Save the reply with the date. We include questions 4 and 5 because the official documents don't say whether GST is added to MDR, how it's deducted, or whether you can move back to P2PM.

Worked examples: how much would you pay?

Official rates (FAQ Q3, Q32, Q33, Q35, Q37), excluding any GST, which the official documents don't mention.

Single payments to a standard (P2M) merchant

Special categories

One month at a small electronics shop (example)

Say "Mehta Electronics" (a made-up name) is a standard P2M merchant and receives these UPI payments in a month:

So the shop pays ₹2,400 in MDR on ₹8,10,000 of UPI sales. That's 2,400 ÷ 8,10,000 × 100 ≈ 0.30% overall (before any GST), because the small sales are free and the cap limits the big ones.

Compare: a tea stall classed as P2PM that receives ₹80,000 a month by UPI QR pays ₹0, even on the occasional ₹2,500 catering order. (FAQ Q26.)

Run your own numbers with our free Percentage Calculator. If your bank gives you an Excel settlement report, our Excel to CSV/JSON Converter turns it into a CSV you can sort by amount. Both run in your browser, so your sales data isn't uploaded to our servers.

Can a shop pass the charge on to customers?

No. "Merchants on-boarded cannot pass on MDR charges to customers while accepting payments through UPI. The framework ensures consumers pay only the posted price." (FAQ Q34.) Banks "have been advised to ensure that merchants do not pass MDR charges on to customers" (PIB, 15 Sep 2026). NPCI circular OC No. 237/2026-27 (15 Sep 2026) says the same, as quoted by Vinod Kothari & Co. We couldn't open the circular ourselves.

As a customer: if a shop adds a "UPI charge", politely point to this rule. If it continues, raise it with your UPI app or bank.

Myths vs facts

Some headlines and forwards make the change sound bigger than it is.

The government itself asks people to check official sources (Ministry of Finance, RBI, NPCI or PIB) and "not to forward unverified messages." (FAQ Q21.)

Checklist for merchants before 15 October 2026

1. Find out your category (P2PM or P2M) from the bank or app that issued your QR, and get it in writing.
2. Check your last 3 months of UPI QR collections against the ₹1 lakh-a-month limit.
3. Confirm your rate. Are you 0.4%, ₹5 flat (fuel, insurance, utilities and similar), or 0.02% (capital markets)?
4. Ask how MDR will be collected and whether GST is added, so your accounts match your settlements.
5. Estimate your monthly cost from your own sales mix.
6. Don't add a "UPI surcharge" to customer bills. It isn't allowed (FAQ Q34).
7. Consider AutoPay for recurring collections like tuition or memberships, since mandates carry no MDR (FAQ Q22). Check with your bank first.
8. Check your first statement after 15 October against what your bank told you.

FAQ

Will I pay a charge for UPI payments above ₹2,000 from 15 October 2026?

Not as a customer. The merchant pays MDR, UPI apps can't add a platform fee, and shops can't pass MDR on to you. (FAQ Q15, Q17, Q34.)

What is the UPI MDR rate from 15 October 2026?

0.4% above ₹2,000 for standard merchants, capped at ₹300 for ₹75,000 and above. Some essential sectors pay ₹5 flat, and capital markets 0.02% (capped at ₹300). (FAQ Q3, Q33, Q37; PIB.)

Who counts as a small merchant (P2PM)?

A vendor classed as P2PM by their bank and receiving up to ₹1 lakh a month through UPI QR into their own account. They pay zero MDR, even above ₹2,000. (FAQ Q23–Q26.)

What happens if my UPI collections cross ₹1 lakh?

If they're above ₹1 lakh for 3 consecutive months, you're moved to the standard P2M category. (FAQ Q29.) The official documents don't say whether you can move back if collections fall again, so ask your bank.

Is UPI to UPI transfer to family still free?

Yes, at any amount, including transfers between your own accounts. (FAQ Q16.)

Bottom line

For most people, nothing changes: customers pay nothing extra, P2P transfers stay free, and payments of ₹2,000 or less stay free. The change hits merchants outside the P2PM category who receive larger UPI payments.

If you run a shop or freelance business, do one thing this week: ask whoever issued your QR code which category you're in, and get the answer in writing.

Running numbers for your business? SR Infobiz offers 28+ free, privacy-first tools that run in your browser with no sign-up, including a Percentage Calculator, an EMI Calculator and an Excel to CSV/JSON Converter: explore the free tools.

Need billing, POS or accounting software that handles the new UPI charges correctly? Email inquiry@srinfobiz.com.

Disclaimer: This article is general information based on official documents as published on the dates shown. It is not financial, tax or legal advice. Rates and categories can change, and your bank or UPI app decides how they apply to your account. Always confirm your category, rate and charges with your bank or payment provider.

How we researched this

1. Rules come only from official documents (gazette, PIB release, official FAQ). News is used only for context and open questions.
2. Re-checked on 3 Oct 2026. The DFS copy of the FAQ was unchanged since 15 Sep (same size and last-modified date). NPCI's website blocked our downloads, so we couldn't open NPCI's copy or circular OC No. 237 directly.
3. Our own work: the arithmetic, the made-up "Mehta Electronics" example, the checklist and the questions for your bank.

Sources

All accessed 3 October 2026.

Official

1. "Merchant Discount Rate (MDR) on Select UPI (P2M) Transactions: Frequently Asked Questions", Department of Financial Services, Ministry of Finance, dated 15 Sep 2026: https://financialservices.gov.in/sites/default/files/2026-09/FAQs---Merchant-Discount-Rate--MDR--on-Select-UPI--P2M--Transactions_0.pdf
2. The same FAQ, NPCI copy (blocked when we tried to download it; listed for reference): https://www.npci.org.in/uploads/FA_Qs_Merchant_Discount_Rate_MDR_on_Select_UPI_P2_M_Transactions_58dba1d39e.pdf
3. "UPI Continues to Remain Free for Peer to Peer Transactions and 96% of Merchant Transactions", Ministry of Finance, Press Information Bureau, 15 Sep 2026, 6:45 PM (Release ID 2310586): https://www.pib.gov.in/PressReleasePage.aspx?PRID=2310586
4. Gazette of India, Extraordinary, Part II, Section 3(ii), No. 4877, Notification S.O. 5067(E), Ministry of Finance (Department of Financial Services), 14 Sep 2026 (gazette ID CG-DL-E-14092026-276170). Copy used: https://www.taxheal.com/wp-content/uploads/2026/09/276170.pdf
5. NPCI operating circular NPCI/UPI/OC No. 237/2026-27, 15 Sep 2026. Not accessed directly; quoted via source 6.

Secondary (context only)

1. "MDR on UPI: As applicable on Lenders", Vinod Kothari & Co., September 2026: https://vinodkothari.com/wp-content/uploads/2026/09/MDR-on-UPI-_-As-applicable-on-Lenders.pdf
2. "The ₹1-lakh question: When does a small UPI merchant stop being 'small'?", Business Standard (Akshita Singh), 20 Sep 2026: https://www.business-standard.com/finance/news/upi-small-merchant-1-lakh-threshold-p2pm-mdr-explained-126092000221_1.html
3. "MDR reset: Flat ₹5 UPI fee on the table for capital-market transactions", Business Standard, about 19 Sep 2026 (headline and summary seen via news aggregators; we couldn't open the original article).