This is a very reassuring news for millions of ordinary citizens across the country who use digital payments. After Parliament approved the Taxation and Other Laws (Amendment) Bill, 2026, rumors of charges on UPI payments began spreading rapidly on social media and media platforms. Putting an end to this situation, Union Finance Minister Nirmala Sitharaman and the Finance Ministry have issued an official statement clarifying that UPI services will remain completely free for ordinary citizens and customers, as always. The government’s new decision is solely related to creating a new financial framework for large businesses and merchant payments.
Amendment to the Payment and Settlement Systems Act
The government has passed a proposal to amend Section 10A of the Payment and Settlement Systems Act, 2007, which authorizes changes to the ‘Zero-MDR’ (zero merchant discount rate) policy that has been in effect since 2020. Its primary objective is to create a sustainable and secure business model for digital payment infrastructure, banks, and fintech companies (such as PhonePe, Google Pay, Paytm) so they can continue to invest in cybersecurity and network capacity enhancements.
No Impact on General Consumers (P2P) and Small Shopkeepers
According to information provided by the Ministry of Finance, the new rules will not impact general consumers and small merchants:
Person-to-Person: If you send money to a friend, relative, or family member via UPI, there will be a 0% charge.
Small Merchants: Street vendors, grocery stores, and small retailers (with an annual turnover of less than ₹1 to ₹1.5 crore) will not be charged any fees.
Daily Shopping: Customers won’t have to pay a single penny if they scan a UPI QR code for vegetables, milk, or other small everyday expenses.
What will change for large businesses?
Under the proposed rules, only merchants with large turnover (over ₹1.5 crore annually) and select merchant transactions with a value of over ₹2,000 will be subject to a nominal Merchant Discount Rate (MDR). This charge will be passed by merchants to banks and payment service providers (PSPs). The government has clarified that this MDR rate will be very nominal (approximately 0.05% to 0.5%) compared to the charges levied on credit or debit cards (1.5% to 3%).
NPCI’s Steering Committee to Make Final Decision
The Finance Minister has clarified that after the bill is passed, the National Payments Corporation of India (NPCI)-led ‘UPI and Services Steering Committee’ will make the final decision on which categories of large merchants and what turnover limits will be applicable.
While this move by the government will provide security and technical strength to the digital payment ecosystem, UPI will remain as easy and completely free for the general public as before.