GENERAL16 Sept 2026
In graphs | Why private banks and foreign UPI apps stand to gain from the MDR charge
From October 15, 2026, UPI payments of ₹2,000 or more to mid and large merchants will carry a 0.4% Merchant Discount Rate. Person-to-person transfers stay free, and so do merchant payments up to ₹2,000. Only about 2.5% of transactions face this charge. Private banks and apps like PhonePe and Google Pay gain most. Small shops and everyday users are largely unaffected.
Key Statutory Highlights
- A Merchant Discount Rate of 0.4% will apply from October 15, 2026 on UPI payments of ₹2,000 or more to mid and large merchants, while person-to-person transfers remain free of charge.
- Small merchants, including street vendors, who receive up to ₹1 lakh a month through UPI QR codes are exempt, and essential sectors such as railways, fuel and insurance attract a flat ₹5 per transaction.
- The charge can generate up to ₹2,400 crore a month, and the biggest share goes to the payer's bank, followed by the merchant's bank and then the UPI apps.
Actionable Advice for Taxpayers / Founders:If you run a mid-sized or large business that accepts UPI, check your recent payment volumes so you know whether the 0.4% charge will apply to you after October 15, 2026, and discuss the impact on your pricing and books with your CA. Small shops within the ₹1 lakh monthly limit may not need to do anything.
Statutory Disclaimer: TaxQue Shorts are AI-assisted editorial briefs for compliance awareness. This brief has not passed every source check; confirm the original notification before acting. This does not constitute formal legal or CA counsel.
TaxQue News Desk
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