UPI MDR in 2026: Rate, Cap and Who It Applies To
MDR is the merchant discount rate — a charge inside the payment ecosystem for accepting a payment. For specified merchant UPI transactions above ₹2,000, MDR of 0.4% can apply once NPCI notifies the post-Diwali start date (originally 15 October 2026), capped at ₹300 per transaction. It is not a tax.
UPI charges 2026 →At a glance
- Applies to
- Specified merchant (P2M) transactions above ₹2,000
- Rate
- 0.4%
- Cap
- ₹300 per transaction
- Effective from
- Deferred post-Diwali (date TBA)
- Does not apply to
- P2P transfers and eligible small merchants
What MDR actually is
MDR is the cost of accepting a digital payment, shared within the acquiring bank, the payment service provider and the wider ecosystem. It is a commercial charge under the applicable NPCI framework, not a levy under any tax law. Compare it with tax concepts on the UPI tax page.
UPI MDR structure and merchant categories
✓ Official source — NPCI UPI circulars · View · Verified 13 October 2026
How the 0.4% and the ₹300 cap interact
| Transaction value | 0.4% would be | Applicable MDR |
|---|---|---|
| ₹1,500 | — | Nil (at or below ₹2,000) |
| ₹5,000 | ₹20 | ₹20 |
| ₹25,000 | ₹100 | ₹100 |
| ₹75,000 | ₹300 | ₹300 (cap reached) |
| ₹1,00,000 | ₹400 | ₹300 (capped) |
Work out your own figures with the UPI charges calculator, and see the threshold explained on UPI charges above ₹2,000.
Who is outside it
- P2P transfers — unaffected at any amount.
- Merchant transactions of ₹2,000 or less.
- Eligible small merchants under the applicable zero-MDR framework — classification sits with the acquiring bank or aggregator.
- Specified categories such as railways, fuel, utilities, telecom, insurance, credit-card bill payments and tax payments follow separate treatment that must be verified per circular.
Does the customer pay MDR?
The stated regulatory position is that UPI users should not be charged the MDR directly. A business making its own commercial pricing decision is a separate matter from the regulated UPI charge. Details are on UPI P2M charges.
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.