A new UPI charges rule is coming into effect from October 15, 2026. The new framework will introduce a 0.4% Merchant Discount Rate (MDR) on specified UPI payments above ₹2,000 made to merchants.
But there is no need for ordinary UPI users to panic.
Person-to-person UPI payments will remain free, regardless of the amount. Payments to merchants up to ₹2,000 will also remain free. The new MDR mainly applies to qualifying Person-to-Merchant (P2M) transactions above ₹2,000.
When Will the New UPI Rule Start?
The new UPI MDR framework will officially come into effect from:
October 15, 2026
From this date, specified merchant transactions above ₹2,000 will attract a 0.4% MDR, with a maximum cap of ₹300 per transaction.
UPI Charges New Rule 2026: Simple Examples
| Payment | What Happens? |
|---|---|
| ₹500 to a shop | Free |
| ₹2,000 to a shop | Free |
| ₹5,000 to an eligible merchant | 0.4% MDR = ₹20 |
| ₹10,000 to an eligible merchant | 0.4% MDR = ₹40 |
| ₹50,000 to an eligible merchant | 0.4% MDR = ₹200 |
| ₹75,000+ to an eligible merchant | Maximum ₹300 MDR |
| ₹10,000 to a friend | Free |
| ₹50,000 to a family member | Free |
The important point is that MDR is a merchant-side charge within the payment ecosystem. The Finance Ministry has advised banks to ensure that merchants do not pass the charge on to customers.
What Happens If You Buy Something From Amazon or Flipkart?
This is one of the most common questions.
If you purchase a product from an e-commerce platform such as Amazon or Flipkart and make a qualifying UPI payment above ₹2,000, it falls under the merchant payment category.
For example, suppose you buy a product worth ₹10,000.
The MDR calculation would be:
₹10,000 × 0.4% = ₹40
However, this does not mean that you should automatically have to pay an additional ₹40 as a UPI fee.
The MDR is charged within the merchant payment ecosystem, and the government has directed that it should not be passed on to customers. Large e-commerce platforms such as Amazon and Flipkart have been specifically discussed in relation to the new framework.
What About Google Ads Payments?
The new rule is also relevant for businesses that use UPI for online services.
For example, a digital marketing company running Google Ads may add money to its advertising account through UPI.
If that payment is processed as a qualifying P2M merchant transaction and is above ₹2,000, the new MDR framework may apply.
For a ₹10,000 payment:
0.4% MDR = ₹40
But this should not be understood as Google charging the advertiser an additional ₹40 UPI fee. The actual treatment can depend on the payment method and how the transaction is processed.
What About Meta / Facebook and Instagram Ads?
The same principle applies to payments made to online advertising platforms such as Meta/Facebook and Instagram.
If UPI is available as a payment method and the transaction qualifies as a P2M merchant payment above ₹2,000, the MDR framework may apply.
For example:
₹20,000 advertising payment
0.4% MDR = ₹80
Again, this does not mean the customer should automatically be charged an additional ₹80 as a separate UPI fee.
The exact treatment can depend on the payment route and billing setup used by the advertising account.
What If You Send ₹10,000 to a Friend?
Nothing changes.
If you send:
₹10,000 to a friend → Free
₹50,000 to a family member → Free
₹1 lakh to another person → Free
The new MDR applies to P2M transactions, while P2P transactions remain free regardless of the transaction amount.
Is UPI Still Free?
Yes, but it is important to understand which type of transaction you are making.
Person → Person
Any amount → Free
Person → Merchant
Up to ₹2,000 → Free
Person → Eligible Merchant
Above ₹2,000 → 0.4% MDR may apply
₹75,000 or more
MDR capped at ₹300 per transaction.
What About Small Shops?
Eligible small merchants receiving up to ₹1 lakh per month through UPI QR under the specified category will continue to receive zero-MDR treatment.
There are also separate rates for certain sectors such as railways, telecom, insurance and fuel. For specified transactions above ₹2,000 in these categories, a flat ₹5 MDR applies instead of the standard 0.4%.
Is 0.4% a UPI Tax?
No.
The 0.4% is called Merchant Discount Rate (MDR). It is a payment ecosystem charge, not a government tax on ordinary UPI users.
The government has also stated that UPI application providers cannot impose platform or hidden charges on users under this framework.
The New UPI Rule in Simple Words
Send money to a friend → FREE
Pay a shop ₹2,000 → FREE
Buy something online above ₹2,000 → 0.4% MDR may apply to the merchant transaction
Pay for online business services through UPI → The transaction may fall under the merchant-payment framework
Customer paying a separate 0.4% UPI fee → No
So, the new rule does not mean that every UPI user will suddenly have to pay 0.4% whenever they make a payment above ₹2,000.
The important change is the introduction of MDR on specified higher-value merchant transactions, starting October 15, 2026.
Frequently Asked Questions
Is UPI still free after October 15, 2026?
Yes. Person-to-person UPI payments remain free, while merchant payments up to ₹2,000 also remain free.
What is the new UPI charge above ₹2,000?
A 0.4% MDR will apply to specified merchant UPI transactions above ₹2,000, subject to applicable exemptions and caps.
Will I have to pay 0.4% when sending money to a friend?
No. Person-to-person UPI transactions remain free regardless of the amount.
Will Amazon and Flipkart UPI payments above ₹2,000 be affected?
Qualifying UPI payments to e-commerce merchants above ₹2,000 can fall under the new P2M MDR framework. However, the MDR is not supposed to be passed on to customers as a separate charge.
Will Google Ads payments through UPI be charged?
If the payment is processed as a qualifying P2M transaction above ₹2,000, the MDR framework may apply. The exact treatment depends on the payment route and transaction classification.
Will Facebook or Instagram Ads payments through UPI be charged?
A qualifying P2M payment above ₹2,000 may fall under the MDR framework. The actual treatment can depend on the payment method and billing setup.
When will the new UPI charges rule start?
The new MDR framework will come into effect from October 15, 2026.
Is 0.4% UPI MDR a tax?
No. MDR is a payment ecosystem charge and is not a government tax charged directly to UPI users.