INCOME TAX17 Sept 2026
Passing UPI MDR to customers is a criminal offence: Here's what the law says — experts weigh in
From 15 October, a 0.4% Merchant Discount Rate (MDR) applies on UPI person-to-merchant payments above ₹2,000, paid by merchants. The government says passing this cost to customers is a criminal offence under Section 10A of the Payment and Settlement Systems Act, 2007. Lawyers note that above ₹2,000 the bar comes from NPCI's merchant conditions, so a breach is contractual. Check your pricing now.
Key Statutory Highlights
- From 15 October, a 0.4% Merchant Discount Rate applies on specified UPI person-to-merchant transactions above ₹2,000.
- The government has warned that merchants passing the MDR cost on to customers would be committing a criminal offence.
- Lawyers say that for transactions above ₹2,000, the restriction comes from NPCI's merchant onboarding conditions, so a violation is only a contractual breach.
Actionable Advice for Taxpayers / Founders:Check your billing and pricing now, and avoid adding any separate line like "UPI surcharge" or "digital payment charge". Since experts differ on the exact legal position above ₹2,000, it is safer to speak to your CA or lawyer before you change anything for UPI customers.
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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