Can a shopkeeper charge the 0.4% to customers? What the rules actually say

The short answer

Can a shopkeeper charge the UPI fee to the customer?

No. A merchant may not pass MDR on to the customer - not on the bill, not as a surcharge, and not by charging UPI customers a higher price (FAQ Q34).

The fee comes out of what the merchant receives. The customer pays the posted price and nothing more.

In this article

1. The rule in one line
2. The customer's side stays free
3. Every way of passing it on is ruled out
4. Where the money actually comes from
5. Why the rules chose this
6. If a shop asks you to pay it
7. How a merchant should think about the cost
8. What about card payments?
9. A quick checklist for merchants

Since the new UPI charges were announced, two questions keep coming up at the counter. Shopkeepers ask whether they can simply add the 0.4% to the bill. Customers ask whether they will now be charged for scanning a QR code. The official FAQ from NPCI and the Department of Financial Services answers both, and the answers fit together neatly: the charge sits with the merchant, and it stays with the merchant.

This article sets out what the rule says, what it rules out, where the money actually comes from, and what a sensible merchant does about the cost instead. Every point carries its FAQ question number so you can check it in the official document.

The rule in one line

The FAQ puts it plainly: merchants who have been onboarded cannot pass MDR charges on to customers when accepting UPI payments, and the framework is designed so that consumers pay only the posted price FAQ question FAQ Q34.

That sentence does two jobs. It says who pays - the merchant - and it says the customer's price does not move because of the payment method. Everything else in this article follows from it.

It helps to be precise about what MDR is. It is the Merchant Discount Rate: a charge the merchant pays, on payments above ₹2,000, to the bank and payment companies that carry the money FAQ question FAQ Q3. On a ₹5,000 payment it is ₹20, and the merchant receives ₹4,980. The customer still sends ₹5,000. Nothing is added on their side.

The customer's side stays free

The FAQ repeats this from several angles, because the rumours have come from several angles:

• Ordinary consumers are not charged for paying by UPI. They carry on free of cost, as before FAQ question FAQ Q15.
• Sending money to friends and family, or between your own accounts, stays free for both sides FAQ question FAQ Q16.
• UPI apps may not charge a platform fee or any other charge on a UPI payment FAQ question FAQ Q17.
• Scanning a QR code at a local shop or vendor stays free for the customer, whatever the amount FAQ question FAQ Q19.
• There is no monthly quota of free payments for consumers; paying often does not trigger a fee FAQ question FAQ Q20.

So if a customer is asked for "UPI charges", it is not a charge the rules created. It is the merchant trying to recover their own cost - which is the one thing the rules forbid.

Every way of passing it on is ruled out

Merchants have floated several ways of getting the fee back. Here is how each one sits against the rule. We only say what follows from the FAQ's wording; we do not invent penalties it does not mention.

A line on the bill. Adding "UPI charge ₹20" or "MDR 0.4%" to the invoice is passing the charge on in the most direct way. The customer would be paying more than the posted price, which is exactly what FAQ question FAQ Q34 rules out.

A sign at the counter. "0.4% extra on UPI" or "₹10 extra for payments above ₹2,000" is the same thing announced in advance. Telling people beforehand does not change what it is.

A higher price for UPI than for cash. Quoting ₹5,020 to a UPI customer and ₹5,000 to a cash customer is a surcharge wearing a different coat. The FAQ says consumers pay only the posted price FAQ question FAQ Q34, and a price that changes with the payment method is not one posted price.

Asking the customer to round up. "Make it ₹5,020, the bank takes something" is still asking the customer to cover MDR.

Refusing UPI above ₹2,000 unless the customer pays extra. Same again - the extra is the fee, moved onto the customer.

Where the money actually comes from

The easiest way to see why the customer's price does not change is to follow the money. The customer sends the full amount. The fee is taken along the way, by the bank and payment companies that carry the payment. What is left settles into the merchant's account.

Where MDR is deducted from a UPI paymentThree-box flow diagram: the customer sends ₹5,000. ₹20 of MDR is deducted along the UPI rails, bank and PSP. ₹4,980 reaches the merchant's account. A note underneath says this ₹20 may not be recovered from the customer (FAQ Q34).

Because the deduction happens before settlement, the merchant never "pays" MDR as a separate transaction. It simply shows up as the difference between what the customer sent and what reached the account. That is also why a merchant who wants to check the deductions should look at the settlement report, not at the bill - more on that in How to read your UPI settlement statement and spot a wrong deduction.

Why the rules chose this

The FAQ gives its own reasoning, and it is worth knowing because customers may ask. It argues that merchants absorb small payment-processing costs as a normal overhead, offset by more footfall, larger bills and less cash to handle, and that because UPI MDR is much lower than credit card fees and applies only above a threshold, shopkeepers have no reason to raise shelf prices FAQ question FAQ Q18. It also notes that payments up to ₹2,000 - more than 95% of UPI merchant payments by volume - carry no charge at all FAQ question FAQ Q2.

You do not have to agree with the reasoning to follow the rule. But it does point to where the cost really lands for most shops: on a small number of larger payments.

If a shop asks you to pay it

If you are a customer and a shop adds a "UPI charge" to your bill, you are entitled to point out that the rules do not allow it FAQ question FAQ Q34, and that UPI stays free for consumers FAQ question FAQ Q15. Most of the time that is enough - many shopkeepers have simply heard a rumour.

The same official channels are where to check anything you see forwarded on social media about "new UPI charges for customers". The government has asked people not to forward unverified messages about payment charges FAQ question FAQ Q21.

How a merchant should think about the cost

If the fee cannot go on the customer's bill, the useful question becomes: how big is it for my shop, really? For most shops the honest answer is "smaller than the worry".

First, payments of ₹2,000 or less cost nothing FAQ question FAQ Q26. A kirana, a tea stall or a vegetable seller may go whole days without a single payment that attracts MDR.

Second, if your UPI money arrives over QR straight into a personal account and you collect up to ₹1 lakh a month over UPI, you are a P2PM merchant and pay nothing at all, even on larger payments FAQ question FAQ Q23, Q24. The check takes a minute: Does the new UPI MDR apply to my shop? A step-by-step check, and the exemption in detail: P2PM explained: the ₹1 lakh monthly exemption for small merchants.

Third, for the payments that are charged, the fee is predictable:

Put your own figures into the monthly cost estimator to see yours, and the MDR calculator for any single amount. Worked months for a kirana, a restaurant and a pharmacy are in How much will UPI MDR cost my business? Worked scenarios for a kirana, a restaurant and a pharmacy.

What about card payments?

This article is about UPI. The FAQ's rule on passing MDR to customers is written about UPI payments FAQ question FAQ Q34, and it says credit-linked UPI payments, such as a RuPay credit card linked to UPI, follow the separate rules for credit products FAQ question FAQ Q36. It says nothing about surcharges on card payments, so we do not either. How card fees compare with UPI is covered in UPI vs debit card vs credit card: what a merchant actually pays now.

A quick checklist for merchants

1. Take down any "extra on UPI" sign, and do not add a UPI line to bills FAQ question FAQ Q34.
2. Charge UPI and cash customers the same price.
3. Check whether you are P2PM - if you are, there is nothing to recover in the first place FAQ question FAQ Q23, Q24.
4. Work out your real monthly cost from payments above ₹2,000 only.
5. From 15 October, check your settlement report so you are not charged more than the rules allow FAQ question FAQ Q5.

The whole picture - the ₹300 cap, the flat ₹5 sectors, AutoPay - is in one place in UPI charges from 15 October 2026: the complete guide for merchants.

Common questions

Can a shop add 0.4% to my bill for paying by UPI?

No. Merchants cannot pass MDR on to customers, and consumers pay only the posted price (FAQ Q34).

Will I be charged for scanning a QR code from October 2026?

No. Paying by UPI, including scanning a QR code at a shop, stays free for consumers whatever the amount (FAQ Q15, Q19).

Can a UPI app charge me a platform fee?

No. UPI apps may not charge a platform fee or any other charge on a UPI payment (FAQ Q17).

Can a shop charge more for UPI than for cash?

No. A higher UPI price is a way of passing the fee on, and the FAQ says consumers pay only the posted price (FAQ Q34).