From 15 October 2026, merchants accepting payments via UPI, will pay a fee on payments above ₹2,000.
For six years, accepting UPI cost merchants nothing. That made it the default way to get paid at the counter, on websites and apps. However, the new Merchant Discount Rate (MDR) framework, announced by NPCI on 15 September 2026, changes the math for a specific set of transactions.
This guide is written for business owners and finance teams.
It answers four questions: which rate applies to you, what changes for your business, whether you can pass it on, and a checklist of things to do before the deadline.
The change in one minute
You pay 0.40% on UPI payments above ₹2,000, capped at ₹300, unless your category qualifies for a lower rate or an exemption.
Payments of ₹2,000 or less stay free for every merchant.
MDR is the fee your bank or payment aggregator deducts from your settlement for processing a digital payment. You already pay it on cards. UPI was the exception from 1 January 2020 until now.
- Starts: 15 October 2026.
- Who pays: the merchant. Your customer still pays exactly the bill amount.
- What it covers: person-to-merchant (P2M) UPI payments above ₹2,000, charged on the full amount, not just the part above ₹2,000.
Find your rate
Your rate depends on two things: your merchant category (MCC) and the size of each payment. Find your row below.
| If you are… | On payments of ₹2,000 or less | On payments above ₹2,000 | Cap per payment |
|---|---|---|---|
| A merchant receiving up to ₹1 lakh a month via QR into a personal account (P2PM) | 0% | 0% | Not applicable |
| A general or large merchant: retail, D2C, e-commerce, travel, electronics, SaaS, food delivery | 0% | 0.40% | ₹300 (reached at ₹75,000) |
| An Industry Program category: railways, telecom, utilities, insurance, fuel, education, agriculture inputs, government payments, tolls and FASTag, wallet top-ups, debt collection | 0% | Flat ₹5 | ₹5 |
| In capital markets: mutual funds, stockbrokers, securities dealers | 0% | 0.02% | ₹300 |
| Collecting via UPI AutoPay or mandates | 0% | 0% | Not applicable |
| Accepting RuPay credit cards or credit lines on UPI | Existing credit card MDR | Existing credit card MDR | As per card rules |
| Accepting wallet (PPI) payments on UPI | No change | No change | No change |
A small merchant whose UPI inflows cross ₹1 lakh a month for 3 consecutive months moves into the standard P2M category.
*All rates are exclusive of 18% GST on the MDR amount.
What changes for your type of business
The impact grows with your average order value. Businesses with large tickets on standard P2M rates feel it most; small merchants and essential services barely feel it.
- Small shops and street vendors: nothing changes if you stay within ₹1 lakh a month on a personal-account QR. Your existing QR and soundbox keep working. Keep an eye on monthly inflows so you know when you cross into P2M.
- Online D2C and e-commerce: most orders under ₹2,000 stay free. Higher-value orders now cost 0.40%. Watch your margins on premium SKUs and bundles.
- High-ticket sellers (electronics, jewellery, travel, furniture): this is the group most affected, since most payments sit above ₹2,000. The ₹300 cap helps on very large orders.
- Subscription and recurring businesses: move recurring collections to UPI AutoPay. Mandates carry zero MDR, so renewals stay free.
- Schools, insurers, utilities and telecom: a flat ₹5 per payment, however large. UPI stays far cheaper than cards for big collections.
- AMCs, brokers and investment platforms: 0.02% keeps UPI the lowest-cost way to collect lump sums and SIPs.
- Marketplaces and platforms: MDR applies on the customer payment into your account. Whether it applies to payouts you send to sellers over UPI is still being clarified.
Cashfree will not charge a separate platform or technology fee in addition to the published commercial charge of 1.95% (inclusive of MDR), for payment gateway services.
Can you pass the cost on to customers?
No. NPCI has told banks to ensure merchants do not add MDR to the customer’s bill, and has also said merchants should not inflate shelf prices to recover it.
In practice, that rules out:
- A “UPI convenience fee” or surcharge line at checkout or on invoices.
- A higher price for paying by UPI than by cash.
- Signage at the counter asking customers to pay extra for UPI.
What you can do is manage the cost the way you already manage card fees: absorb it in your overall pricing, steer recurring payments to AutoPay, and use payment-method offers to shape your mix.
UPI is still your cheapest way to get paid
Even at 0.40%, UPI costs a fraction of card acceptance.
On a ₹10,000 payment:
| Payment method | Typical MDR | Cost on ₹10,000 (before GST) |
| UPI, Industry Program category | Flat ₹5 | ₹5 |
| UPI, standard P2M | 0.40% | ₹40 |
| Debit card | Up to 0.90% | Up to ₹90 |
| Credit card | 1.5% to 2.5% | ₹150 to ₹250 |
UPI also keeps its other advantages: instant settlement options, no card data to secure, and the payment method most Indian customers already reach for first.
There is little reason to push customers away from UPI. The bigger risk is nudging them toward cash or cards, which costs you more in handling or fees.
Your checklist before 15 October
There is still time to get ready if you start now.
- Confirm your MCC. Your category decides whether you pay 0.40%, a flat ₹5 or 0.02%. Ask your payment partner which MCC you are registered under.
- Size your exposure. Pull 3 months of UPI data and find the share of value above ₹2,000. Multiply by 0.40% (or your category rate) to get a monthly estimate.
- Move recurring payments to AutoPay. Subscriptions, EMIs and memberships on mandates carry zero MDR.
- Brief your staff. Customers may ask if UPI now costs money. The answer is no: it is free for them.
Want to know more about UPI MDR and how we can help you?
Contact UsMerchant FAQs for UPI MDR
Is MDR charged on the full payment or only the amount above ₹2,000?
On the full payment. A ₹3,000 payment costs 0.40% of ₹3,000, which is ₹12.
Do I need a new QR code, soundbox or integration?
No. Existing QR codes, soundboxes and integrations keep working.
I am a small merchant. How do I know if I qualify for zero MDR?
You qualify if you receive up to ₹1 lakh a month through UPI QR into a personal account. Cross that for 3 consecutive months and you move to standard P2M rates.
Will I pay GST on the MDR?
Yes, 18% on the MDR amount. If you are GST-registered, you can claim it as input tax credit.
Is this a government tax?
No. MDR is a service fee that stays within the payments ecosystem and divided among the ecosystem players (Payer PSP, UPI App, Acquiring Bank and Issuing Bank)
