New UPI Charges From October 15, 2026: ₹2,000 Rule, 0.4% MDR & Who Pays

UPI payments are set to change from October 15, 2026, but the headline “UPI charges” can be misleading. The new framework introduces a 0.4% Merchant Discount Rate (MDR) on specified UPI merchant transactions above ₹2,000. It does not mean that people will suddenly have to pay a fee every time they send money through UPI.  The government has clarified that person-to-person (P2P) UPI payments will remain free, while UPI payments to merchants up to ₹2,000 will also remain free. Around 96% of P2M transactions are expected to remain unaffected. For NRIs who use UPI with NRE/NRO accounts, the important question is whether this changes the cost of making payments in India. Here is what the new MDR framework actually means. Let’s start this quick guide and clear the confusion that everyone has regarding the New UPI Charges From October 15 2026. 

What Are the New UPI Charges From October 15, 2026?

From October 15, 2026, a Merchant Discount Rate of 0.4% will apply to specified Person-to-Merchant (P2M) UPI transactions above ₹2,000. The charge is part of the merchant-payment ecosystem. It is not a new fee that UPI users will have to pay directly when making an eligible payment. The government has specifically stated that MDR is not a tax or a government charge collected from customers. Here’s how the MDR will be treated for different categories: The revised framework is therefore narrower than the phrase “UPI will become chargeable” suggests.

What Is MDR on UPI Payments?

MDR, or Merchant Discount Rate, is the fee a merchant pays to their bank for accepting a digital payment. In simple terms, if a customer pays a shop using UPI, MDR would be the small fee deducted from the merchant’s payment. For regular UPI transactions in India, MDR is currently 0%, so merchants generally do not pay a fee for accepting UPI payments.

Will Customers Have to Pay the New UPI Charges?

No, customers generally do not have to pay extra charges for making regular UPI payments. The new UPI-related charges, where applicable, are not a direct fee on customers for normal UPI transactions. For everyday payments such as paying a shopkeeper or sending money to another person through UPI, you can continue to use UPI without paying an additional charge. For eg. If you transfer ₹5,000 to a friend or family member, the transaction remains a P2P payment and continues to be free, regardless of the amount. Similarly, a merchant payment of up to ₹2,000 remains free of MDR. The new charge applies to specified merchant transactions above the ₹2,000 threshold. It is a merchant-side MDR rather than a fee that the customer should see added to the UPI payment. So, if you scan a restaurant's QR code and pay ₹5,000, the new MDR framework does not mean your UPI app should add a separate ₹20 charge to your bill.

What Is the ₹2,000 Rule for UPI Payments?

The ₹2,000 threshold applies to eligible Person-to-Merchant payments. That means the rules depend on who you are paying, not simply on the amount being transferred. Consider these examples:

• ₹1,500 to a shop: No MDR.
• ₹2,000 to a merchant: No MDR.
• ₹5,000 to an eligible merchant: 0.4% MDR applies within the merchant ecosystem.
• ₹5,000 to a friend: No MDR because it is a P2P payment.
• ₹50,000 to a family member: No MDR because P2P payments remain outside the framework.

The ₹2,000 rule therefore should not be interpreted as a new limit on how much you can send through UPI. It is primarily a threshold for determining when MDR can apply to specified merchant transactions.

How Much Is the New 0.4% UPI MDR?

The standard MDR for specified eligible P2M transactions above ₹2,000 is 0.4%. Understand this New 0.4% rule with a table breakdown: For transactions of ₹75,000 or more, the MDR is capped at ₹300 per transaction. These calculations explain the MDR amount within the payment ecosystem. They should not be read as an additional amount that the customer is required to add to the payment.

Which UPI Transactions Will Attract MDR?

The new MDR framework mainly covers specified P2M transactions above ₹2,000. Where will the MDR be applied?

• Standard P2M Rate: For eligible Person-to-Merchant (P2M) transactions above ₹2,000, the standard MDR is 0.4% (capped at ₹300 for payments of ₹75,000 and above).
• Essential Sectors: Specific categories—including railways, telecommunications, insurance, fuel, and agricultural inputs—attract a flat ₹5 MDR on transactions above ₹2,000 instead of the standard 0.4% variable fee.
• Capital Market Transactions: Payments towards mutual funds, securities, stockbrokers, and dealers carry a reduced MDR of 0.02%, capped at a maximum of ₹300 per transaction.

Which UPI Transactions Will Remain Free?

Several common UPI transactions will continue without MDR.

1. Person-to-person payments

Sending money to friends, family or another individual remains free, irrespective of the amount.

2. Merchant payments up to ₹2,000

P2M transactions of up to ₹2,000 remain free of MDR.

3. Payments received by qualifying small merchants

Small merchants receiving up to ₹1 lakh per month through UPI QR codes under the P2PM category will continue to receive zero-MDR treatment. This is intended to protect small businesses such as street vendors and neighbourhood shops. As a result, the government says approximately 96% of P2M transactions will remain unaffected.

Who Actually Pays the UPI MDR — Customers or Merchants?

Short Answer: Merchants pay the MDR. Customers do not pay any fee for making UPI payments. Key Breakdown

• For Customers: UPI payments are 100% free. When you pay ₹2,000 at a store using GPay, PhonePe, or Paytm, exactly ₹2,000 gets deducted from your bank account.
• For Merchants: Merchants (businesses) bear the MDR fee. If an MDR applies, the bank or payment provider deducts a small percentage (or flat fee) before depositing the remaining amount into the merchant's account.

UPI MDR Charges Explained (2026)

• Transactions Under ₹2,000: FREE (Zero charges for both Customer & Merchant)
• Transactions Above ₹2,000 (Via Credit Card/Wallet): 0.4% Fee (Merchant pays this fee, NOT the customer)
• Essential Services Above ₹2,000 (Fuel, Railways, Utilities): Flat ₹5 Fee (Merchant pays this capped fee, NOT the customer)

Key Takeaway: UPI is 100% Free for Customers. Only merchants pay a minor fee on specific high-value transactions.

What Does the New UPI Rule Mean for NRIs?

For NRIs, the new rules are mainly relevant when making merchant payments in India through UPI. NPCI supports UPI for NRIs with eligible NRE/NRO accounts, including users who link supported international mobile numbers to their bank accounts. The exact availability depends on the participating bank and UPI application. The new MDR framework does not create a separate “NRI UPI charge” simply because the person making the payment is an NRI. So, if an NRI uses an eligible NRE or NRO account to make a qualifying merchant payment in India, the relevant issue is the type and value of the merchant transaction, not simply the customer's NRI status. For NRIs, the practical takeaway is straightforward: the new 0.4% MDR should not be treated as a new personal UPI transaction fee.

Will NRE and NRO Account UPI Payments Be Affected?

If you're an NRI using UPI to pay for things in India, the same rules apply to you as to any resident user. There is no separate MDR stated specifically for NRE or NRO account holders under the new framework. NPCI's existing NRI UPI facility allows eligible NRE/NRO account holders to use UPI subject to their bank's terms and supported arrangements. The new MDR rules instead distinguish between transaction types such as P2P and P2M, along with the applicable merchant category and transaction amount. For example:

• NRI sends ₹10,000 from an eligible NRO-linked UPI account to a family member: → P2P transaction → no MDR.
• NRI pays ₹10,000 to an eligible merchant in India: → P2M transaction → applicable MDR rules may apply on the merchant side.

The important point is that NRE/NRO status does not itself turn a normal UPI payment into a chargeable customer transaction. NRIs using international mobile numbers should also remember that UPI availability depends on supported banks, apps and country codes. NPCI currently lists countries including the US, UK, UAE, Canada, Australia, Singapore and others for international mobile-number linkage. Also Read: New Investment Rules for NRIs Need Help With NRI UPI Payments? Get assistance from abroad.

New UPI Charges From October 15: Examples of How the MDR Works

Here are some simple examples to understand the change. The actual applicability depends on how the transaction is classified under the UPI framework.

What Should UPI Users Know Before October 15, 2026?

The biggest thing to remember is that “UPI charges” does not mean every UPI user will start paying a transaction fee. From October 15:

• P2P UPI payments remain free.
• Merchant payments up to ₹2,000 remain free of MDR.
• Specified P2M transactions above ₹2,000 can attract 0.4% MDR.
• The standard MDR is capped at ₹300 for transactions of ₹75,000 or more.
• Certain essential sectors have a flat ₹5 MDR.
• Capital-market transactions have a separate 0.02% MDR, capped at ₹300.
• Qualifying small merchants continue under the zero-MDR framework.
• Customers are not supposed to pay the MDR directly.

For NRIs, there is no separate new “NRI UPI fee” in the framework. The key issue is whether the payment is P2P or P2M and how the merchant transaction is classified.

Conclusion

The New UPI Charges From October are not a blanket fee on every UPI payment. From October 15, 2026, the new MDR framework mainly affects specified merchant transactions above ₹2,000, while P2P transfers and eligible merchant payments up to ₹2,000 remain free of MDR. For users, the key point is that 0.4% MDR is not the same as a customer transaction fee. NRIs using eligible NRE or NRO accounts should also focus on the type of payment they are making rather than assuming that their NRI status will attract an additional UPI charge. As the new rules take effect, checking the transaction type and applicable category will be more useful than simply looking at the ₹2,000 threshold.