UPI charges from 15 October 2026: the complete guide for merchants

The short answer

What will UPI cost a merchant from 15 October 2026?

On every UPI payment above ₹2,000, the merchant pays 0.4% of the full amount as MDR, never more than ₹300 on a single payment.

Payments of ₹2,000 or less cost nothing, and small merchants taking up to ₹1 lakh a month over QR straight into a personal account pay nothing at all.

In this article

1. The short version: what each payment costs
2. The ₹2,000 threshold: free below, the full amount above
3. The ₹300 cap: large payments stop costing more
4. Small merchants pay nothing (P2PM)
5. Some sectors pay a flat ₹5 instead of 0.4%
6. No MDR on AutoPay or SIPs
7. You cannot pass the charge on to customers
8. Your QR code, soundbox and registration stay the same
9. Where the money is deducted, and how to check it
10. What will it cost your business in a month?
11. What is not settled yet

From 15 October 2026, merchants start paying a charge on UPI payments. It is called the Merchant Discount Rate, or MDR. The rules were set out by NPCI and the Department of Financial Services (DFS) at the Ministry of Finance in an FAQ published on 15 September 2026. This guide walks through that document in plain language. Every rule carries its FAQ question number, so you can check it against the official source yourself.

One thing first, because it shapes everything else: UPI MDR is a charge on the merchant, not the customer. The customer pays exactly what they send. The deduction comes out of what lands in your account.

The short version: what each payment costs

The whole rule fits in three lines FAQ question FAQ Q26, Q32:

• A payment of ₹2,000 or less: no charge.
• A payment above ₹2,000: 0.4% of the full amount.
• On any single payment, the charge never exceeds ₹300.

Here is what that looks like at common amounts:

This table is generated by the same rules engine that runs our calculator, so if the rules change, these figures change with them.

The ₹2,000 threshold: free below, the full amount above

This is where most of the confusion sits. ₹2,000 is a threshold, not an allowance. Once a payment goes above ₹2,000, the 0.4% applies to the whole amount - not just to the part above ₹2,000 FAQ question FAQ Q26.

A payment of exactly ₹2,000 is still free, because the rule applies only to payments above ₹2,000. But at ₹2,001 the charge applies to all ₹2,001, so it jumps from nothing to ₹8. One rupee changes the answer, which is why payments close to ₹2,000 are worth a second look on your settlement statement.

The practical upshot: if most of your UPI payments are under ₹2,000 - groceries, tea and snacks, vegetables, small pharmacy bills - most of your takings attract no charge at all. MDR bites only on the payments that are bigger than ₹2,000.

The ₹300 cap: large payments stop costing more

MDR on any single payment can never be more than ₹300 FAQ question FAQ Q32. Since 0.4% of ₹75,000 is exactly ₹300, the fee reaches the cap at ₹75,000 and stops growing. Whether the payment is ₹1 lakh or ₹5 lakh, the charge stays the same.

MDR at different amountsBar chart: ₹0 on ₹2,000, ₹20 on ₹5,000, ₹200 on ₹50,000, ₹300 on ₹75,000, ₹300 on ₹1,00,000. At ₹75,000 the fee reaches the ₹300 cap and stops growing - it is the same on ₹1,00,000.

This matters most to merchants selling big-ticket items - furniture, electronics, jewellery, wholesale. At 0.4%, a ₹1 lakh payment would cost ₹400; with the cap, it costs ₹300. Worked examples at every level are in How the ₹300 UPI MDR cap works, with examples at ₹5,000, ₹50,000 and ₹1 lakh.

Small merchants pay nothing (P2PM)

This is the biggest relief in the rules. Merchants who take UPI payments over QR straight into a personal (savings) account, and whose UPI collections are up to ₹1 lakh a month, are categorised as P2PM. Their MDR is zero - and that is mandatory, not left to a bank's discretion FAQ question FAQ Q23, Q24. One month above ₹1 lakh does not change your category; a merchant moves to P2M only after three months in a row above it FAQ question FAQ Q29.

There is a subtle point that matters a great deal: MDR follows how your account is categorised, not the size of each payment FAQ question FAQ Q26. So a P2PM merchant pays nothing even on a payment above ₹2,000.

Three questions settle which category you are in. The step-by-step check is in Does the new UPI MDR apply to my shop? A step-by-step check, and the exemption itself is explained in P2PM explained: the ₹1 lakh monthly exemption for small merchants.

Some sectors pay a flat ₹5 instead of 0.4%

The FAQ names sectors where every payment above ₹2,000 attracts a flat ₹5 instead of 0.4%: railways, telecom, insurance and fuel FAQ question FAQ Q33, and electricity, water and piped-gas bills FAQ question FAQ Q41. The ₹300 cap never comes into it, because ₹5 is already a fixed amount. An ₹80,000 payment at a fuel station still costs ₹5. At ₹2,000 or less, these sectors pay nothing either.

Which sectors pay a flat ₹5Railways, Telecom, Insurance, Fuel, Utilities pay a flat ₹5 on every payment above ₹2,000 (FAQ Q33, Q41). A separate dashed tile underneath marks the rest: the FAQ adds "among others", and the full list has not been published.

More on these sectors: Flat ₹5 sectors: fuel, telecom, insurance, railways, utilities - and what is still unconfirmed.

No MDR on AutoPay or SIPs

Recurring payments set up as UPI AutoPay mandates - utility bills, OTT subscriptions, SIPs and the like - carry no MDR FAQ question FAQ Q22. The exemption holds whatever the amount. If you collect from customers through UPI AutoPay mandates, those collections should not be charged. The full picture: Why AutoPay and SIP payments carry no UPI MDR.

You cannot pass the charge on to customers

Plenty of merchants are asking whether they can simply add 0.4% to the bill. They cannot. A merchant may not recover MDR from the customer FAQ question FAQ Q34 - not as a line on the bill, not with a "0.4% extra on UPI" sign at the counter, and not by quoting UPI customers a higher price. The detail is in Can a shopkeeper charge the 0.4% to customers? What the rules actually say.

Your QR code, soundbox and registration stay the same

There is no QR code to replace, no soundbox to swap and no re-registration to do FAQ question FAQ Q25. If anyone offers you a "new QR for the new rules", or asks for money for one, check with your bank first.

Where the money is deducted, and how to check it

MDR comes out before the money reaches your account. The customer sends the full amount; the charge is taken along the UPI rails, bank and PSP; the rest settles to you.

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).

So you will not see the charge as a separate payment - it shows up in your settlement report. DFS has said charges will be monitored daily from 15 October. It is still worth reading your own report. These five are the mistakes to look for:

1. A charge on a payment of ₹2,000 or less.
2. More than ₹300 taken on a single payment.
3. A charge on a payment dated before 15 October 2026 FAQ question FAQ Q5.
4. A charge on an AutoPay mandate collection.
5. Any charge at all if you are a P2PM merchant.

Our settlement check runs every line of your CSV report through exactly these rules, and the file never leaves your phone. To learn to read the report yourself, see How to read your UPI settlement statement and spot a wrong deduction.

What will it cost your business in a month?

Your cost depends on how many of your payments are above ₹2,000 and how large they are - not on your total turnover. Working it out from an average ticket gives the wrong answer.

Put in your own figures with the monthly cost estimator. Full scenarios 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, and the comparison with card payments is in UPI vs debit card vs credit card: what a merchant actually pays now.

What is not settled yet

The FAQ sets out the rules, but some pieces are still to come:

UPI MDR: what has happened, what is still awaitedTimeline: the NPCI/DFS FAQ was published on 15 September 2026; MDR takes effect on 15 October 2026 with daily monitoring. Still awaited: NPCI operating circular, Small-merchant support fund.

As soon as any of this changes, we will update this guide and record the date on the updates page.

Common questions

When do UPI charges start?

From 15 October 2026. No MDR is due on any payment dated before that (FAQ Q5).

Is a payment of exactly ₹2,000 charged?

No. The rule applies to payments above ₹2,000, so exactly ₹2,000 costs nothing (FAQ Q26).

Do I need to change my QR code or soundbox?

No. There is no QR or soundbox change and no re-registration (FAQ Q25).

More than ₹300 was taken on one payment. What should I do?

MDR on a single payment cannot exceed ₹300 (FAQ Q32). Run your settlement report through the settlement check, download the PDF and show it to your PSP or bank.