New UPI Payment Rules Set to Change Transaction Landscape from October 15, 2026

Upcoming Changes to UPI Payments

Starting October 15, 2026, a new regulation concerning UPI payments will come into effect, impacting millions of digital payment users. Reports circulating on social media suggest that customers may incur charges for UPI transactions. However, government clarifications indicate that ordinary UPI users will not face any direct transaction fees. The changes primarily relate to the Merchant Discount Rate (MDR) applicable to larger merchant transactions.

Will UPI Payments Incur Charges from October 15?

It is essential to clarify that there will be no fees for individual-to-individual UPI transactions starting October 15. This means that sending money to friends, family, or others via UPI will remain free, regardless of the transaction amount.

Additionally, payments of up to ₹2,000 made to merchants will also be exempt from MDR. The government assures that the zero-MDR policy for small traders will continue.

What Transactions Will Attract 0.4% MDR?

Under the new framework, certain Person-to-Merchant (P2M) UPI transactions exceeding ₹2,000 will incur a 0.4% MDR. This fee is not an additional charge deducted from the customer's account but is a fee applicable within the merchant's payment ecosystem.

The government has clarified that MDR is not a tax and is not collected directly by the government or NPCI. The funds generated will be distributed among various stakeholders in the payment system.

Impact on Regular Customers

When a customer scans a UPI QR code to make a payment at a store, they will not be required to pay any extra fees for using UPI. For instance, if the total is ₹2,500, the customer will only pay ₹2,500 without any additional 0.4% UPI charge. The government has reiterated that no transaction fees will be levied on consumers for UPI transactions.

However, there are concerns that the fees applicable to merchants could indirectly affect market prices. Discussions are ongoing among business organizations and the digital payment industry regarding this change.

96% of Merchants Will Not Be Affected

According to the finance ministry, the new rules will impact only a small fraction of UPI transactions. The government has stated that approximately 96% of merchants' UPI transactions will remain unaffected. The zero-MDR policy for payments up to ₹2,000 and for small traders will continue.

This means that most small UPI payments made in daily transactions will still be processed without any additional fees.

Support for Small Traders

The new framework includes provisions to support small traders. Those eligible small merchants receiving up to ₹1 lakh monthly through UPI QR will continue under the zero-MDR policy. This aims to minimize the impact of new fees on small shopkeepers and businesses.

Legal Challenges Regarding MDR

The implementation of MDR on UPI has also become a subject of legal scrutiny. At the end of September 2026, the Supreme Court declined to impose an immediate stay on this arrangement, paving the way for the new framework to take effect on October 15. The court has requested responses from the central government, RBI, and NPCI regarding the matter.

Summary of Changes

• October 15, 2026: New MDR framework to be implemented.


• Person-to-Person UPI: Will remain free.


• Merchant Payments up to ₹2,000: Will be exempt from MDR.


• P2M Payments over ₹2,000: Will incur a 0.4% MDR.


• No direct UPI transaction fees: Will be charged to customers.


• Approximately 96% of P2M transactions: Are expected to remain unaffected.

Conclusion

Thus, stating that “customers will be charged for every UPI payment starting October 15” is misleading. The actual changes pertain to the application of MDR on larger merchant transactions, while P2P transfers and most everyday UPI payments for the general public will continue to be free.