UPI Transaction Charges: Nowadays, everyone uses UPI for payments, whether large or small. If you use UPI, it is important to understand the rules regarding the MDR—or Merchant Discount Rate—that applies to merchants. Under this system, a charge is levied on certain select UPI merchant transactions exceeding ₹2,000. Importantly, this charge is not borne by customers; rather, it is collected from merchants.
MDR stands for Merchant Discount Rate. It is a fee charged by the payment system provider that enables a merchant to accept digital payments. When a payment is made via UPI at a shop, the merchant may be required to pay a processing fee.
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A flat ₹5 MDR applies to eligible education-related UPI transactions above ₹2,000 to merchants.
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“>October 22, 2026
Which payments attract a ₹5 charge?
For specific categories, a flat MDR of ₹5 is applied to UPI merchant payments exceeding ₹2,000. This includes payments for railway services, telecom services, insurance premiums, fuel (petrol/diesel), agricultural-related payments, education, and certain other services. This means that for eligible payments within these categories, the fee remains a flat ₹5 per transaction, regardless of the total payment amount.
What are the charges for retail shops?
For general retail shops and other merchant categories, an MDR of 0.4% applies to UPI payments exceeding ₹2,000. For transactions of ₹75,000 or more, the fee is capped at a maximum of ₹300. For instance, a payment of ₹5,000 would incur an MDR of 0.4% (i.e., ₹20). Similarly, a payment of ₹10,000 would attract a charge of ₹40, while a payment of ₹1 lakh would be subject to the maximum charge of ₹300.
Which UPI transactions remain free of charge?
UPI payments made from one person to another—that is, person-to-person (P2P) payments—will remain free of charge. There is no limit on the amount for such transactions. For instance, if you make a payment of ₹2,000, you will not be required to pay any MDR (Merchant Discount Rate) charges.