UPI has become one of the most widely used digital payment methods in India. A new Merchant Discount Rate (MDR) framework has now brought attention to UPI payments above ₹2,000 made to merchants.
According to the information issued by the Department of Financial Services (DFS), Ministry of Finance, Government of India, a 0.4% MDR applies to specified UPI Person-to-Merchant (P2M) transactions above ₹2,000. The government clarification also explains the treatment of smaller transactions, selected sectors and the amount that can apply to higher-value payments.
The important point for customers is that this MDR is not meant to be directly passed on to consumers.
Official UPI MDR Government PDF
The Department of Financial Services has published an official FAQ explaining the Merchant Discount Rate on selected UPI P2M transactions.
Readers who want to check the original government document can use the official PDF below.
📄 Official Government PDF:
👉 Download UPI MDR Government PDF
| Details | Information |
| Department | Department of Financial Services |
| Ministry | Ministry of Finance, Government of India |
| Document | FAQs on MDR on Select UPI (P2M) Transactions |
| Payment type covered | Selected UPI P2M transactions |
| Official source | Government of India |
What Is the New UPI MDR Rule?
The new framework concerns Person-to-Merchant (P2M) UPI payments above ₹2,000.
For eligible transactions, the standard MDR mentioned in the government FAQ is 0.4%. MDR, or Merchant Discount Rate, is a charge associated with processing merchant payments through the payment ecosystem.
It is important to understand that MDR is not the same as a new tax or a general UPI fee for every customer.
The applicable conditions depend on the type and value of the transaction.
Will Consumers Have to Pay 0.4% on UPI Payments?
No. The government clarification states that the MDR cannot be passed on to customers as an additional charge.
This means customers should not assume that a ₹5,000 UPI payment will automatically result in an additional ₹20 charge for them.
The MDR is handled within the merchant payment ecosystem rather than being presented to the customer as a separate UPI charge.
What Happens to UPI Payments Up to ₹2,000?
Transactions up to ₹2,000 remain outside the 0.4% MDR framework described in the government FAQ.
Therefore, the headline about a 0.4% MDR should not be interpreted as a charge applicable to every UPI payment.
The distinction between transaction value and payment type is important when understanding the new UPI rules.
What Is the MDR on Payments Above ₹2,000?
For specified UPI P2M transactions above ₹2,000, the standard MDR is 0.4%.
The government framework also provides a maximum MDR of ₹300 for transactions of ₹75,000 and above.
This creates a cap for larger eligible transactions instead of allowing the MDR to increase indefinitely with the transaction amount.
UPI MDR Examples
| Transaction amount | Applicable framework |
| Up to ₹2,000 | Outside the 0.4% MDR framework |
| Above ₹2,000 | 0.4% MDR for specified P2M transactions |
| ₹75,000 and above | MDR subject to ₹300 cap |
| P2P UPI transfer | Remains free |
The exact applicability should always be checked against the official government conditions.
Special UPI Categories With ₹5 MDR
The government FAQ also mentions special treatment for specified categories.
For certain transactions above ₹2,000 involving sectors such as railways, telecom, insurance and fuel, a flat MDR of ₹5 applies under the specified conditions.
This means the 0.4% rate should not automatically be applied to every sector or merchant transaction.
| Category | Specified MDR treatment |
| Railways | ₹5 flat MDR for specified transactions |
| Telecom | ₹5 flat MDR for specified transactions |
| Insurance | ₹5 flat MDR for specified transactions |
| Fuel | ₹5 flat MDR for specified transactions |
The official PDF should be referred to for the detailed conditions applicable to these categories.
What About Person-to-Person UPI Payments?
There is an important difference between P2P and P2M UPI payments.
P2P means a payment from one individual to another individual. P2M means a payment made to a merchant.
The new MDR framework is focused on selected P2M transactions. Person-to-person UPI transfers continue to remain free.
For this reason, the statement that “UPI will now charge 0.4%” is incomplete without explaining which type of transaction is being discussed.
Who Is Affected by the New UPI MDR Rule?
The framework mainly concerns the merchant and payment ecosystem side of eligible UPI transactions.
For ordinary customers, the key point is that the MDR should not be separately added to their bill as a UPI charge.
Merchants and payment ecosystem participants handling eligible P2M transactions need to follow the applicable MDR conditions.
UPI Transaction Charges 2026: Key Points
- The new framework concerns selected UPI P2M transactions.
- A 0.4% MDR applies to specified merchant payments above ₹2,000.
- Transactions up to ₹2,000 remain outside this MDR framework.
- Transactions of ₹75,000 and above have an MDR cap of ₹300.
- Specified railway, telecom, insurance and fuel transactions have a ₹5 flat MDR.
- The MDR should not be passed directly to customers.
- P2P UPI transactions remain free.
- The official Government FAQ should be checked for category-specific conditions.
Official Government PDF / UPI MDR Document
For readers who want to verify the policy directly from the Government of India, the official Department of Financial Services PDF is available here:
👉 Download Official UPI MDR Government PDF
Issued by: Department of Financial Services, Ministry of Finance, Government of India
Document: FAQs – Merchant Discount Rate (MDR) on Select UPI (P2M) Transactions
Readers should refer to the official document for the latest applicable conditions rather than relying only on social media posts or headlines.
Frequently Asked Questions
Is UPI now charging 0.4% from customers?
No. The 0.4% figure relates to the MDR applicable to specified P2M transactions. The MDR is not to be directly passed on to customers.
Does the 0.4% MDR apply to UPI payments below ₹2,000?
No. Transactions up to ₹2,000 remain outside the 0.4% MDR framework described in the government FAQ.
Is there a limit on MDR for high-value transactions?
Yes. For transactions of ₹75,000 and above, the MDR is subject to a ₹300 cap under the specified framework.
Are UPI-to-UPI transfers between individuals affected?
P2P UPI transactions remain free.
Where can I read the official UPI MDR document?
The official FAQ is available through the Department of Financial Services, Ministry of Finance, Government of India. The PDF link is provided above.
