India: UPI Will Remain Free for Users as Government Plans New Framework for Merchant Charges

The Government of India has clarified that UPI payments will continue to remain free for consumers, addressing concerns that recent changes to the country’s payment laws could lead to transaction charges for ordinary users.

In an official release, the Ministry of Finance said that person-to-person UPI payments will remain free and that consumers will not face transaction charges for everyday use. Any future merchant discount rate, or MDR, would apply only to a limited category of merchant transactions above a specified threshold. Press Information Bureau

No Charges for Consumers

The government said the key points are straightforward:

• UPI users will not be charged for making payments.

• Person-to-person transfers will continue to be free.

• Most merchant transactions will also remain free.

• If an MDR is introduced later, it would be limited, threshold-based and set at a nominal level lower than typical debit or credit card charges. Press Information Bureau

The clarification comes after debate over proposed changes to Section 10A of the Payment and Settlement Systems Act, 2007.

Why the Government Wants to Change the Law

According to the Finance Ministry, the proposed amendment is meant to give the UPI ecosystem more flexibility to fund future growth, cybersecurity, fraud prevention and technology upgrades.

The government said that relying only on subsidies may not be sustainable as UPI usage continues to expand rapidly. It wants the system to remain affordable while also giving payment companies and infrastructure providers a viable long-term revenue model. Press Information Bureau

If Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, a new UPI and Services Steering Committee, headed by the National Payments Corporation of India, would decide whether any MDR should be introduced and how it would apply. Press Information Bureau

UPI Continues Rapid Growth

UPI has become a central part of India’s digital payments system since its launch in 2016.

According to the Finance Ministry, the platform processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone. The government also said UPI is now live in 11 foreign countries, with several others showing interest in adopting or integrating with the system. Press Information Bureau

The scale of that growth has increased the need for investment in payment infrastructure, fraud prevention and system resilience.

Most Merchants Expected to Remain Unaffected

The government emphasized that any future MDR would not be imposed across all merchant payments.

Instead, it would apply only to a limited set of transactions above a threshold, with the large majority of UPI merchant payments continuing without charges. The exact threshold and fee structure have not yet been finalized. Press Information Bureau

That distinction is important for small merchants and consumers who increasingly rely on UPI for daily payments.

Government Pushes Back on Rumors

The Ministry of Finance also rejected reports suggesting that outside pressure was driving the policy changes.

It said the proposed amendment should instead be viewed as part of a broader effort to keep India’s digital payment system sustainable, competitive and secure as transaction volumes continue to grow. Press Information Bureau

The government urged citizens to rely on official information from the Ministry of Finance, the Reserve Bank of India and NPCI rather than unverified social media messages.

What UPI Users Should Know

For consumers, the immediate message is clear: UPI remains free for everyday use.

For merchants, most transactions are also expected to remain free, while any future charges would be limited to select transactions and introduced only after the proposed legal framework is approved and the relevant committee makes a decision.

The move reflects the government’s attempt to balance two priorities—keeping UPI inexpensive and inclusive for users while ensuring the infrastructure behind India’s rapidly expanding digital-payment network can remain financially sustainable.