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The Government of India has clarified that the UPI users will not be charged transaction fees, while addressing the concerns regarding the recent amendment-related debate around the Payment and Settlement Systems Act (PSS Act). As per the government, all Person-to-Person (P2P) transactions will remain free, while any future Merchant Discount Rate (MDR) would apply only to a limited category of those merchant transactions whose limit specified above threshold.
Will UPI Users Have to Pay Charges?
No. The government has categorically stated that consumers who are making UPI payments will not face transaction charges.
This means that everyday users can continue using UPI to send money, make payments and conduct routine digital transactions without paying any separate UPI transaction fee.
The government has also specifically reaffirmed that the all P2P transactions will remain free of charge. This is important because person-to-person transfers are among the most common uses of UPI.
NPCI also describes that UPI as an instant payment system that enables money transfers between participating bank accounts, while also supporting the merchant payments.
What About UPI Charges for Merchants?
The proposed framework does not mean that MDR will automatically be imposed on the every merchant transaction.
According to the government, if MDR is introduced in the future, it would,
- Apply only to a limited set of the merchant transactions
- Be applicable above a specified threshold
- Be charged at a nominal rate
- Remain significantly lower than the typical debit or credit card MDR
- Leave the vast majority of merchant UPI transactions free
Therefore, the current clarification also clarifies between charges paid by consumers and a possible future revenue mechanism which involving certain merchant transactions.
Why Is the PSS Act Being Amended?
The government has described that the amendment to the PSS Act as an enabling provision, rather than just immediate decision to impose UPI charges.
UPI’s extraordinary growth requires the continuous investment in cybersecurity, fraud prevention, technology and payment infrastructure.
NPCI itself highlights security, two-factor authentication, real-time payments and grievance mechanisms as important components of the UPI ecosystem.
The government also argues that a sustainable revenue framework could also encourage the greater participation and competition among companies while reducing long-term dependence on subsidies.
The stated objective is to ensure that UPI remains secure, inclusive, affordable and capable of supporting India’s expanding digital economy.
Who Will Decide on Future MDR?
The government has clarified that after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes changes to the Section 10A of the PSS Act, the UPI and Services Steering Committee headed by NPCI will determine whether the MDR should be introduced and how it would operate.
This means that the amendment itself should not be interpreted as an immediate blanket fee on UPI transactions.
