The new UPI fee on larger payments, explained for small businesses in India
India only. From 15 October 2026, a UPI payment to a business above ₹2,000 carries a small fee. Most shops will never see it. A dentist, a guesthouse or a contractor may.
The short version
India only. From 15 October 2026, a UPI payment from a customer to a business above ₹2,000 carries a Merchant Discount Rate of 0.4%, capped at ₹300 on a transaction (Business Today, 22 Sept 2026). Payments up to ₹2,000 are not charged, and neither is a business receiving up to ₹1 lakh a month through UPI. A café or salon taking small QR payments sees nothing. A dentist, guesthouse or contractor taking larger amounts should ask their payment app what it will deduct, and from when.
This article is for businesses in India. From 15 October 2026, a UPI payment from a customer to a business (person-to-merchant, or P2M) above ₹2,000 attracts a Merchant Discount Rate, or MDR, of 0.4%, subject to an overall cap of ₹300. MDR is the fee charged on the business side of a payment. The customer pays the price on the bill; the fee comes out of what the business receives.
Most businesses will never pay it. NPCI, which runs UPI, says transactions up to ₹2,000 are not charged and “account for more than 96% of UPI merchant transaction volume”, and that “Merchants receiving up to Rs 1 lakh a month through UPI are also not liable to pay MDR”.
So the question is not whether UPI has become expensive. It has not. The question is whether your business takes payments above ₹2,000, and enough of them to matter. Here is who pays, how much, and what to check with your payment app before the middle of October. If the money reaches you through an online booking or deposit, the bookings article is the companion piece.
Who pays the fee, and who does not.
The fee falls on the business, on payments above ₹2,000, and only if the business takes more than ₹1 lakh a month through UPI. Both limits come from NPCI and were reported when the change was confirmed (Business Today, 22 Sept 2026). NPCI has also published a set of questions and answers covering the change (NPCI FAQ, 15 Sept 2026).
- Not charged: any payment of ₹2,000 or less, whatever the business.
- Not charged: a business receiving up to ₹1 lakh a month through UPI, whatever the size of the payment.
- Charged at 0.4%, up to ₹300: a payment above ₹2,000 to a business over that monthly limit.
- Charged a flat ₹5: payments above ₹2,000 in specified categories, including railways, telecom services, insurance and fuel.
The flat-fee categories are large operators, not the corner shop, so for most readers the rule is the first three lines. GST is charged on the fee itself, which is why the news headlines mention GST. The fee is small. The point is to know whether it lands on you at all.
What it costs, in rupees.
The fee is a fraction of a percent until it reaches the cap, and the cap is low. Below is the arithmetic on the whole transaction amount, for the sizes of payment a local business might take. Your payment app may present the figures differently, so treat these as the order of magnitude, not the exact deduction.
| Payment | Fee at 0.4% | Who might take a payment this size |
|---|---|---|
| ₹2,000 | Nil | A café bill, a haircut, a small repair |
| ₹2,500 | ₹10 | A salon package, a dental check-up |
| ₹5,000 | ₹20 | A plumber's call-out with parts |
| ₹25,000 | ₹100 | A guesthouse stay, a course of dental treatment |
| ₹75,000 | ₹300 | A contractor's stage payment |
| Above ₹75,000 | ₹300, capped | A booking amount on a property, a large job |
Two things stand out. The fee never goes above ₹300 on a single payment, however large. And a business that takes only a few payments a month above ₹2,000 may well sit under the ₹1 lakh monthly limit and pay nothing at all. The place to check is your payment app or bank, which knows whether your account is over the monthly limit and what it will deduct.
Which businesses will notice.
A café, a salon or a corner shop taking QR payments of a few hundred rupees will see nothing. Nearly all of their payments sit under the ₹2,000 line, and NPCI's own figure is that more than 96% of UPI merchant transactions do (Business Today, 22 Sept 2026).
The businesses that will notice are the ones that take larger single payments. A dentist billing a course of treatment. A guesthouse taking a stay in one payment. An estate agent taking a booking amount. A contractor or electrician paid by stage. A tuition centre paid by term. If any of those describes you, and your UPI takings are over ₹1 lakh a month, budget for the fee from 15 October. It lands in the same month as another per-message cost, for businesses on a paid WhatsApp tool.
The cost is modest. What changes is that the amount reaching your account is now slightly different from the amount on the customer's bill, and your records should show both, along with the GST on the fee. Whoever does your books will want the fee as a separate line, not buried in a smaller receipt.
Try this now
Open your payment app and find last month's UPI total. If it is under ₹1 lakh, you are outside the fee for now and can stop here. If it is over, list every payment above ₹2,000 in that month and look up its fee in the table above. The total is roughly the monthly cost to expect.
Do not split a bill to stay under the line without checking first.
The obvious dodge is to take a large bill as several smaller payments, each under ₹2,000. Do not do that without reading your payment app's terms and the NPCI questions and answers first (NPCI FAQ, 15 Sept 2026). Whether splitting is allowed, and how a run of split payments is treated, is not something this article can tell you.
There is a plainer reason not to. A customer asked to pay a single bill in several pieces at the counter will wonder why, and the answer is not one you want to give. A fee capped at ₹300 (Business Today, 22 Sept 2026) is not worth looking evasive over.
Whether a business may add a charge to the customer to cover the fee is a question for your payment provider and your accountant. This article does not cover it. The simplest position is to treat the fee as a cost of taking payment, like rent or electricity, and to price for it if it matters.
What to check before 15 October.
Most of this is one conversation with your payment app or bank. Ask whether your account is above or below the monthly limit, what exactly will be deducted on a payment above ₹2,000 (Business Today, 22 Sept 2026), and from what date. Get the answer in writing, even if that is a screenshot of the chat.
If customers pay you through a booking or deposit step on your website, the total they are paying should be stated plainly before they pay, and the confirmation should show the same figure. The fee is your cost, not theirs, and nothing about it should appear in the customer's flow. The bookings article linked above covers how a deposit step should look; whoever built your site can add the total to the confirmation if it is missing.
- You know your monthly UPI takings: under ₹1 lakh, or over.
- Your payment app or bank has told you, in writing, what it will deduct on payments above ₹2,000 and from what date.
- You know whether your account is over the monthly limit, and which category it is in.
- Invoices and booking confirmations state the full amount the customer pays.
- Your bookkeeping records the amount received, the fee and the GST on the fee as separate lines.
- No bill is being split to stay under the line unless your provider has confirmed that is allowed.
- You have read the NPCI questions and answers once, so nothing in October is a surprise.
0 of 7 checked
A few common questions.
Does this apply outside India?
No. UPI is India's payment system and the Merchant Discount Rate change applies to UPI merchant payments in India. Businesses in the United States, Ireland or the euro area are not affected.
Will my customers pay more?
The fee is charged to the business receiving the payment, not to the person paying. The customer pays the amount on the bill. Whether a business may add a charge to cover the fee is not covered here; ask your payment app or your accountant.
I run a small café taking QR payments. Do I need to do anything?
Probably not. Payments of ₹2,000 or less are not charged, and NPCI says those are more than 96% of UPI merchant transactions. A business receiving up to ₹1 lakh a month through UPI is not charged at all. Check your monthly total once and carry on.
What is MDR?
Merchant Discount Rate. It is the fee charged on the business side of a card or digital payment, taken out of what the business receives. From 15 October 2026 it applies to UPI payments to a business above ₹2,000, at 0.4% with a cap of ₹300, for businesses over the monthly limit.
Is a payment of exactly ₹2,000 charged?
No. NPCI's wording is that transactions up to ₹2,000 are not charged, so the fee starts above that amount. If you are in any doubt about how your payment app treats the boundary, ask it.
Where are the official rules?
NPCI published a set of questions and answers on MDR for select UPI merchant transactions on 15 September 2026, as a PDF on its website. Your payment app or bank should also have written to you about what it will deduct. If it has not, ask.
