New Delhi: The National Payments Corporation of India (NPCI) has decided to introduce the Merchant Discount Rate (MDR) on select person-to-merchant (P2M) Unified Payments Interface (UPI) transactions after Diwali, with the implementation date to be announced separately.
In a statement posted on X on Tuesday, NPCI said the UPI and Services Steering Committee had decided to implement the charges immediately after the festive season, taking into account the timing of Diwali.
The proposed framework will apply to specified merchant transactions, while person-to-person (P2P) transfers will remain exempt. However, NPCI has not yet disclosed the complete list of merchant categories that will be covered under the revised framework.
MDR is a fee charged to merchants for processing digital payments. Under the proposed structure, UPI payments exceeding ₹2,000 will attract charges depending on the category of the merchant receiving the payment.
A flat MDR of ₹5 per transaction will apply to payments above ₹2,000 made to merchants in four specified categories: railways, telecom services, insurance and fuel.
For other eligible P2M UPI transactions exceeding ₹2,000, the MDR will be 0.4% of the transaction value, subject to a maximum charge of ₹300 per transaction.
The framework follows Parliament’s passage of the Taxation and Other Laws (Amendment) Bill, 2026, on Aug. 11. The legislation amended Section 10A of the Payment and Settlement Systems Act, 2007, empowering the government to permit charges on specified digital payment modes.
The proposed changes mark a shift in the existing framework governing charges on UPI transactions, particularly those involving merchants. However, the extent of their impact will depend on the final implementation date and the categories of transactions covered by the new rules.
NPCI has said the implementation date will be notified separately.
