UPI 0.4% MDR Framework Explained: Who Pays, What Stays Free
Under the framework announced on 15 September 2026, specified merchant UPI payments above ₹2,000 can attract an MDR of 0.4%, capped at ₹300 per transaction. P2P transfers, payments up to ₹2,000 and eligible small merchants stay free. The start has been deferred until after Diwali.
UPI MDR postponed until after Diwali →At a glance
- Announced
- 15 September 2026
- Rate
- 0.4%
- Applies above
- ₹2,000 (specified P2M)
- Cap
- ₹300 per transaction
- Charged to customer?
- No — merchant side
- Start date
- After Diwali — TBA
How much is the charge?
0.4% works out to ₹8 on a ₹2,000 payment and ₹40 on a ₹10,000 payment. The charge is capped at ₹300 per transaction, reached at ₹75,000. Payments above that still carry a maximum of ₹300.
| Merchant payment | Estimated MDR at 0.4% |
|---|---|
| ₹2,000 | ₹0 (₹2,000 or less is free) |
| ₹2,500 | ₹10 |
| ₹10,000 | ₹40 |
| ₹50,000 | ₹200 |
| ₹75,000 | ₹300 (cap) |
| ₹1,00,000 | ₹300 (cap) |
Rate, threshold and cap as reported from the NPCI framework.
✓ Official source — The Economic Times · View · Verified 13 October 2026
Who pays it?
MDR is a merchant-side charge. Under the framework, merchants cannot pass the fee on to customers. The government has said the MDR is meant to help fund UPI infrastructure, merchant expansion and fraud prevention. More in UPI MDR explained.
What stays free
- All P2P transfers, whatever the amount.
- Merchant payments of ₹2,000 or less — see UPI charges above ₹2,000.
- Payments to eligible small merchants under the zero-MDR framework.
Timeline
| Date | Event |
|---|---|
| 15 September 2026 | NPCI announces the MDR framework |
| 15 October 2026 | Original start date |
| 13 October 2026 | NPCI defers the start until after Diwali — read the news |
| To be notified | New implementation date |
Reuters report on the deferral.
✓ Official source — Reuters via VCCircle · View · Verified 13 October 2026
Moneycontrol report on the deferral.
✓ Official source — Moneycontrol · View · Verified 13 October 2026
Frequently asked questions
Is the 0.4% UPI charge a tax?
No. It is a merchant discount rate, a payment-processing charge — not a government tax.
Does the ₹300 cap apply to every payment?
The cap limits the MDR on any single applicable transaction to ₹300, which is reached at ₹75,000.
Sources and verification
Facts on this page are checked against official sources — NPCI, RBI, the Income Tax Department, the Ministry of Finance, PIB and the GST portal. See the full list on the official sources page, the fact-checking process, or report an issue through corrections. Last verified: 13 October 2026.
Related pages
This page is educational information, not professional tax, legal or financial advice. Rules can change — verify against the latest official notification or consult a qualified professional before acting.