The Finance Ministry on Saturday clarified that consumers making payments through UPI will not face any transaction charges and all person-to-person (P2P) payments will continue to remain free of charge.
In a statement, the Finance Ministry said that as and when Merchant Discount Rate (MDR) charges are introduced, they will apply only to a limited set of merchant transactions above a certain threshold, at a nominal rate far lower than debit or credit card MDRs.
The vast majority of transactions will remain free of charge for merchants on UPI, it said. MDR, if introduced, will only be threshold-based and will not be levied on all transactions.
Once Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007, the ‘UPI and Services Steering Committee’ headed by the National Payments Corporation of India (NPCI) will decide on the MDR, if any.
The recent amendment to the Payment and Settlement Systems Act (PSS Act) has generated debate, with some misinterpreting it as a move to impose charges on ordinary users.
In reality, the amendment is an enabling provision designed to ensure UPI’s long-term sustainability, technological advancement and resilience against emerging risks.
“Some of the media reports have suggested that external influences may be driving policy changes. This is unfounded, completely false and misleading. If external pressure had been a factor, the government would not have introduced UPI in 2016 or made it free of charge for both merchants as well as citizens since January 2020 and ensured that it became the world’s largest real time interoperable payment system,” the statement added.
The amendment should therefore be viewed in the context of the government’s broader objective of ensuring that India’s digital payment infrastructure remains sustainable, competitive, innovative and capable of serving the country’s rapidly expanding digital economy.
Furthermore, the statement emphasised that the truth is simple: UPI is India’s own innovation, and the government remains committed to keeping it free for citizens while ensuring its sustainability for decades to come.
