The government on Saturday clarified that UPI users will not face any transaction charges, while indicating that a Merchant Discount Rate (MDR), if introduced, would be restricted to a limited set of merchant transactions above a specified threshold. It said the proposed amendment to the Payment and Settlement Systems Act was only an enabling provision and did not amount to the blanket imposition of charges on UPI transactions.
In a statement, Finance Ministry said, “Consumers making payments will not face any transaction charges” and that “all Person-to-Person transactions will continue to be free of charge.” It further clarified that if MDR is introduced, it would apply only to “a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs.”
Finance Ministry also sought to make clear that the proposed framework would not result in a blanket charge on merchants. “The vast majority of the transactions will remain free of charge for merchants on UPI. MDR, if introduced, will only be threshold based and not blanketly levied to all,” it said.
The clarification comes amid a political row over the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007. The amendment has drawn criticism from Congress leader Jairam Ramesh, who has questioned the removal of the statutory zero-MDR protection and argued that government assurances cannot substitute for a legal safeguard.
