Govt Clarifies Zero UPI Charges Up to Rs 2,000: Will Larger Payments Face Fees?

The Ministry of Finance On Monday notified changes to the Payment and Settlement Systems Act, saying banks or system providers cannot levy charges on transactions of up to Rs 2,000 and RuPay debit card payments. The ministry, in a gazette notification under Section 10A of the Act, said that digital payments made through RuPay debit cards and UPI transactions up to the Rs 2,000 threshold should not attract any charges.  

The notification said that no bank or system provider may impose any charge, directly or indirectly, on a person making or receiving payment through these modes. 

Will UPI Payments Above Rs 2,000 Attract A Fee? 

As per Finance Minister Nirmala Sitharaman, there will not be any charges, at least for consumers. Speaking inthe  Rajya Sabha earlier last month, the finance minister said that the amendment to Section 10A under the Taxation and Other Laws (Amendment) Bill, 2026, enables a provision that "does not impose any tax or transaction charge on UPI users.

She stressed that no fees will apply to street vendors, cab drivers, grocery stores or other small businesses. She said that if any fees are imposed in the future, they will be borne by the business, not the individual making the payment.

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Merchant Discount Rate (MDR) Context

The recent bill removes the ban on charging MDR on UPI transactions. MDR is a small fee merchants pay payment providers for processing digital transactions, a fee UPI had been exempt from since 2020 to promote adoption.

Managing UPI's massive transaction volume incurs significant infrastructure costs currently borne by banks, payment apps, and NPCI with government subsidies. Reintroducing MDR would help these providers fund necessary operational and security investments.

Who Will Decide? 

The new law allows the government to permit charges but does not automatically implement them. The NPCI-led UPI Steering Committee will determine if, when, and how MDR will be structured, though no decision has been finalised yet.