Does the new UPI MDR apply to my shop? A step-by-step check

The short answer

Does the new UPI MDR apply to my shop?

Not if your UPI money arrives over QR straight into a personal account and your UPI collections are up to ₹1 lakh a month - then you pay nothing.

Every other shop pays, but only on payments above ₹2,000.

In this article

1. Question one: which account does the money go into?
2. Question two: how much do you collect over UPI in a month?
3. Question three: what kind of business do you run?
4. The whole decision in one picture
5. Four shops, four answers
6. Three common mix-ups
7. "It applies" does not mean every payment is charged
8. Do you need to do anything?
9. Before 15 October: a five-minute checklist
10. If you are P2PM and a charge was deducted anyway

From 15 October 2026, merchants start paying MDR on UPI payments - but not every shop pays, and those that do don't pay on every payment. Three questions settle it. The first two decide whether UPI MDR applies to you at all; the third decides how much it costs if it does.

This article takes the three questions in turn, then applies them to four different shops. If you just want the answer, put your three answers into the eligibility check. If you want to understand it, read on.

Question one: which account does the money go into?

This is the question that matters most. The exemption for small merchants covers those whose UPI money arrives over QR straight into a personal (savings) account FAQ question FAQ Q23, Q24.

An easy way to check:

• Look at your bank passbook or statement. It states the account type - savings or current.
• Check which account receives the money when customers scan your QR. Many merchants have more than one account.
• If you are not sure, ask your bank what kind of account your UPI payments land in.

If the money goes into a current account or a merchant account, you are in the P2M category and MDR applies to you - however small your collections are. If it goes over QR straight into a personal savings account, move on to question two.

Question two: how much do you collect over UPI in a month?

The second condition is the amount: up to ₹1 lakh a month over UPI FAQ question FAQ Q23, Q24. Exactly ₹1 lakh still counts, because the condition is "up to" ₹1 lakh.

To work out your figure, add up every UPI payment received in a month from your bank statement or your UPI app's history. One month can be unusual, so looking at the last two or three gives a clearer picture.

If both conditions hold - money over QR straight into a personal account, and monthly collections up to ₹1 lakh - you are a P2PM merchant and your MDR is zero. That exemption is mandatory; it is not up to your bank.

One point that is easy to miss: MDR follows your category, not the size of the payment FAQ question FAQ Q26. A P2PM merchant pays nothing even on a payment above ₹2,000.

If your collections go above ₹1 lakh in a single month - during the festive season, say - there is no need to panic. Banks track the UPI money coming in each month, and a P2PM merchant is moved to P2M only when UPI receipts stay above ₹1 lakh for three months in a row FAQ question FAQ Q29. One busy month does not change your category.

Question three: what kind of business do you run?

If MDR applies to you, this question decides how much:

• Most shops - grocery, restaurants, pharmacies, clothing, services - pay 0.4% of the full amount on payments above ₹2,000, capped at ₹300 per payment FAQ question FAQ Q26, Q32.
• Railways, telecom, insurance and fuel pay a flat ₹5 per payment above ₹2,000 instead of 0.4% FAQ question FAQ Q33. So do electricity, water and piped-gas bills FAQ question FAQ Q41.

The whole decision in one picture

The first two questions decide your category. Once the category is settled, so is the answer:

Does MDR apply - how the decision is madeDecision diagram. First question: does the money arrive over QR straight into a personal account? If no, MDR applies. If yes, second question: are monthly UPI collections within ₹1,00,000? If yes, MDR does not apply (P2PM, FAQ Q23 and Q24). If no, MDR applies (P2M) at 0.4% above ₹2,000, capped at ₹300 per transaction. Payments of ₹2,000 or less are free for everyone.

Four shops, four answers

Here are the same three questions applied to four different shops. The names are made up; the arithmetic follows the actual rules.

Mohan's case is the useful one, because it is where most of the worry sits. "MDR applies to you" does not mean every payment is charged.

Three common mix-ups

"My shop is small, so I must be exempt." Size alone does not decide it. A small shop whose UPI money lands in a current account is P2M, like Mohan's tea stall above. The exemption depends on where the money goes and how much comes in over UPI FAQ question FAQ Q23, Q24.

"₹1 lakh means my total sales." The condition is about what you receive over UPI QR in a month. Cash sales are not UPI payments, so they are not part of that figure.

"The exemption is something my bank may or may not give me." It is not optional. For a merchant who meets both conditions, zero MDR is mandatory FAQ question FAQ Q23, Q24.

"It applies" does not mean every payment is charged

Even for P2M merchants, only payments above ₹2,000 attract a charge FAQ question FAQ Q26, and a payment of exactly ₹2,000 is still free. If most of your bills are small, your monthly cost will be small too.

See what any single amount costs in the MDR calculator, or estimate a whole month with the monthly cost estimator. Full scenarios for a kirana, a restaurant and a pharmacy: How much will UPI MDR cost my business? Worked scenarios for a kirana, a restaurant and a pharmacy.

Do you need to do anything?

No. There is no QR code to change, no soundbox to swap and no re-registration FAQ question FAQ Q25. And whichever category you are in, you cannot add the charge to a customer's bill FAQ question FAQ Q34. The detail: Can a shopkeeper charge the 0.4% to customers? What the rules actually say.

Before 15 October: a five-minute checklist

1. Find out which kind of account your QR pays into - savings or current.
2. Add up your UPI receipts for each of the last three months.
3. Count how many of your payments are above ₹2,000. Those are the only ones that can ever be charged.
4. Keep your September and October settlement statements, so you can compare before and after the change FAQ question FAQ Q5.
5. Do not add anything to your customers' bills FAQ question FAQ Q34, and do not pay anyone for a "new QR" FAQ question FAQ Q25.

If you are P2PM and a charge was deducted anyway

No MDR is due from a P2PM merchant. If a charge appears on your settlement report after 15 October:

1. Download the report as a CSV from your PSP app or net banking.
2. Put it through the settlement check and choose "Small merchant (P2PM)". Every deduction will be listed.
3. Download the PDF of the result and take it to your PSP or bank.

DFS has said charges will be monitored daily from 15 October, so keep your statements. Learn to read the report: How to read your UPI settlement statement and spot a wrong deduction. And the exemption in full: P2PM explained: the ₹1 lakh monthly exemption for small merchants.

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

Common questions

I collect ₹50,000 a month but into a current account. Am I charged?

Yes, MDR applies, because the exemption only covers money arriving over QR straight into a personal account (FAQ Q23, Q24). But only payments above ₹2,000 are charged.

Do I need to register anywhere for the P2PM exemption?

The FAQ says no re-registration is needed, and no QR or soundbox change either (FAQ Q25). To confirm your category, ask your bank.

Is a P2PM merchant charged on payments above ₹2,000?

No. MDR follows the category, not the payment size, so a P2PM merchant pays nothing at any amount (FAQ Q26).