The Centre says UPI will remain free for users, with any future MDR limited to select merchant transactions above thresholds under a new enabling framework.
New Delhi, August 8: The Centre has clarified that users will not be charged for making UPI payments, amid concerns following the Lok Sabha’s passage of the Taxation and Other Laws (Amendment) Bill, 2026, which enables a future framework for Merchant Discount Rate (MDR) on certain digital transactions.
The Ministry of Finance said on Saturday that consumers making payments through UPI will continue to face no transaction charges and that all person-to-person (P2P) transactions will remain free.
The clarification comes after Parliament passed the amendment to the Payment and Settlement Systems Act, 2007. The amendment removes the existing legal restriction under Section 10A that prevents charges from being imposed on certain notified digital payment systems.
The government stressed that the amendment is an enabling provision and does not introduce an immediate MDR on UPI transactions.
Future MDR to be limited and threshold-based
According to the Finance Ministry, any MDR introduced in the future would apply only to a limited category of merchant transactions above a specified threshold.
The rate, if introduced, would be nominal and lower than the MDR generally associated with debit and credit card payments, the ministry said.
The government also maintained that the vast majority of merchant transactions on UPI would continue to remain free. Any decision on MDR will be taken by the UPI and Services Steering Committee headed by NPCI after the legislative amendment comes into effect.
This means the amendment itself does not impose a charge on merchants or users.
No charges for everyday UPI users
The Ministry of Finance reiterated that consumers will not have to pay transaction charges for using UPI.
P2P transfers will also remain free, while the government said small merchants would largely continue to be exempt from any potential future MDR because the framework would be threshold-based rather than universally applied.
The clarification was issued in response to concerns and reports suggesting that the legislative amendment could result in charges being imposed on ordinary UPI users.
The government said such an interpretation was incorrect.
Centre cites sustainability of UPI ecosystem
The Finance Ministry said the amendment is intended to support the long-term sustainability, technological development and resilience of India's digital payment infrastructure.
UPI transaction volumes have expanded sharply, requiring continued investment in cybersecurity, fraud prevention, technology and payment infrastructure, the ministry said.
The government also argued that a sustainable revenue model would help encourage more companies to participate in the digital payments ecosystem and increase competition.
According to the ministry, continued reliance on government subsidies alone may not be sufficient to support the next phase of UPI's expansion.
The proposed legal change, it said, is intended to create a framework that can support the system while retaining affordability and financial inclusion.
UPI processed 2,366 crore transactions in July
The ministry highlighted the scale of UPI's expansion since its launch in 2016-17.
UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone, according to the government.
The platform has also expanded beyond India and is currently live in 11 foreign countries, while several other countries have expressed interest in adopting or integrating with the system.
The government described UPI as an Indian-developed digital payment innovation that has become the world's largest real-time interoperable payment system.
Government rejects claims of external pressure
The Finance Ministry also rejected reports suggesting that external influences were behind the proposed policy change.
It termed such claims unfounded and misleading, pointing to the government's decision to introduce UPI in 2016 and subsequently maintain zero charges for merchants and citizens from January 2020.
The ministry said the amendment should instead be viewed as part of efforts to ensure that India's digital payment infrastructure remains sustainable, competitive and capable of handling the continued expansion of the country's digital economy.
The government further said the next phase of UPI growth would focus on expanding digital payments in rural and semi-urban areas while maintaining security, affordability and technological resilience.
The Centre urged citizens to rely on official information issued by the Ministry of Finance, the Reserve Bank of India and NPCI rather than forwarding unverified messages about UPI charges.
