Last updated: 19 October 2026. The start date has changed once already, and we will update this page as soon as NPCI announces the new one.
For six years, accepting UPI cost shopkeepers nothing. That is about to change for some businesses. NPCI, which runs UPI, has announced a merchant charge (called MDR, or Merchant Discount Rate) on certain UPI payments. It was due to start on 15 October 2026, but on 13 October NPCI postponed it until after Diwali. A new start date has not been announced yet.
Here is what is known so far, in simple words, and what it means for a small shop.
The short answer
- Most small shops will not pay anything. Shops receiving up to ₹1 lakh a month through UPI QR codes are reported to be exempt.
- Payments up to ₹2,000 stay free for everyone. NPCI says these are the large majority of shop payments.
- Customers do not pay this charge. It is charged to the merchant, and payments between people (sending money to friends and family) stay free.
- It has not started yet. Until NPCI announces a new date, UPI merchant payments remain free.
What exactly is MDR?
MDR is a small fee that a shop pays to the banks and payment apps for processing a digital payment. Card payments have always had it, which is why some shops do not like accepting cards. UPI had zero MDR since 2020. The new rules bring back a small fee on larger UPI payments to help cover the cost of running the system.
How much will it cost?
As announced, the charge is 0.4% of the payment amount, but only for payments above ₹2,000, with a maximum of ₹300 on any single payment.
- A ₹1,500 payment: no charge
- A ₹3,000 payment: ₹12
- A ₹10,000 payment: ₹40
- A ₹50,000 payment: ₹200
- ₹75,000 or more: capped at ₹300
Some sectors such as railways, telecom, insurance and fuel are reported to pay a flat ₹5 per payment above ₹2,000 instead.
Is my shop exempt?
As reported, small merchants who receive up to ₹1 lakh a month through UPI QR codes are exempt. If a shop goes above ₹1 lakh a month for three months in a row, it moves into the regular merchant category and the charge applies to its payments above ₹2,000.
A simple way to check: open your UPI business app or your bank statement and add up your UPI collections for each of the last three months.
- Below ₹1 lakh each month: you are likely exempt.
- Above ₹1 lakh, but most payments are below ₹2,000: your real cost will be small, since small payments are free.
- Above ₹1 lakh with many big payments (electronics, furniture, jewellery, wholesale): this affects you most, so plan ahead.
Can I charge customers extra for UPI?
No. The framework is designed so the fee is not added as a separate UPI surcharge at the counter or checkout. Adding a “UPI charge” to a bill can also annoy customers and push them to another shop. If the cost matters to your business, it is better handled through your normal pricing.
What should a small shopkeeper do now?
- Do not panic, and do not stop accepting UPI. Customers expect it, and most of your payments will stay free.
- Check your monthly UPI total for the last three months, as explained above.
- If you sell high-value items, work out roughly how much the charge would be each month. For many shops, it will be less than the cost of handling cash.
- Keep your payments organised. Using a business UPI QR linked to a current account makes it easier to track collections and reconcile your books.
- Watch for the official date. Check announcements from NPCI or your bank, and ignore WhatsApp forwards claiming “UPI is no longer free” for everyone.
Watch out for scams
Whenever payment rules change, fraudsters follow. Be careful of calls or messages that ask you to “update your QR”, “pay a fee to stay exempt” or share an OTP or UPI PIN. No bank or NPCI will ask for your PIN, and there is no registration fee to remain exempt.
Frequently asked questions
Will customers pay more for UPI?
No separate fee is charged to customers. Payments to friends and family remain free, whatever the amount.
When will the charge start?
It was planned for 15 October 2026 and has been postponed until after Diwali. NPCI has said a new date will be announced. We will update this article when it is.
Is there a legal challenge?
Yes. The matter reached the Supreme Court, which in late September 2026 declined to put the framework on hold and asked the government, RBI and NPCI to respond. The outcome could still affect the rules.
The bottom line
For most neighbourhood shops, this change will cost nothing or very little. The shops that should pay attention are those collecting more than ₹1 lakh a month through UPI with many payments above ₹2,000. Check your numbers now, keep accepting UPI, and keep an eye out for the official start date.
This article is for general information and is based on announcements reported in September and October 2026. For decisions specific to your business, check with your bank or a chartered accountant.