Consumers and the vast majority of merchants will not be charged, while all person-to-person UPI transactions will remain free.
The new law enables a future merchant discount rate on certain merchant transactions above a specified threshold; the NPCI-led committee will decide if and when it is introduced.
The network processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 and is now live in 11 countries
Will UPI Payments Now Cost You? Govt Explains New Fee Rules
The government has clarified that UPI will remain free for consumers and most merchants, even as a new legal framework could allow nominal charges on select high-value merchant transactions
UPI Transactions
Summary
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Consumers and the vast majority of merchants will not pay transaction charges for using the Unified Payments Interface (UPI), the government stated on Saturday. All person-to-person transactions will remain free, the government informed in a statement.
This clarification follows the Lok Sabha passing the Taxation and Other Laws (Amendment) Bill, 2026, two days prior. The Bill amends the Payment and Settlement Systems Act, 2007, which triggered speculation about impending fees on the digital payments network. The legislation authorizes the government to allow banks and service providers to impose fees on UPI and other designated electronic payment methods.
The Proposed Regulatory Framework
The proposed change to Section 10A of the law is an enabling provision. It does not immediately impose a merchant discount rate (MDR). Any future MDR will apply only to a limited set of merchant transactions exceeding a specified threshold.
The rate will remain nominal and lower than typical debit and credit card charges.
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The government stated to PTI: "Once the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007, the 'UPI and Services Steering Committee' headed by NPCI will decide on the MDR, if any."
Ensuring Long Term Sustainability
Exponential transaction volumes demand continuous upgrades. The system requires constant investments in cybersecurity, fraud prevention and digital infrastructure. Depending entirely on state subsidies will not support future expansion phases.
The network requires a self-sustaining revenue model to encourage competition and attract corporate investment. This financial independence is also crucial for expanding the payment interface into rural and semi-urban regions.
The government dismissed rumours that external influences drove the policy changes. The statement termed the claims "unfounded, completely false and misleading".
The government stated that if external pressure existed, it would not have introduced the system in 2016. The payment network has remained entirely free for merchants and citizens since January 2020. A balanced framework is necessary to ensure the digital payments architecture remains secure and future-ready.
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Scale Of UPI Success
The network has expanded rapidly. It has evolved into the world's largest real-time payment system since its launch in 2016-17. Describing the platform as a national achievement built by and for Indians, the government stated its decade-long commitment to funding and promoting the ecosystem.
The system processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone. The platform operates live in 11 foreign countries. Several other nations have expressed interest in adopting or integrating the payment interface, the government stated. The government also advised citizens to trust only official communications from the Finance Ministry, the Reserve Bank of India and the NPCI, urging them not to forward unverified messages.