A 0.4 per cent merchant discount rate will apply to specified person-to-merchant UPI payments above Rs 2,000 from October 15, 2026, ending UPI’s zero-fee era for large merchant transactions. The charge is capped at Rs 300 per transaction for payments of Rs 75,000 and above.

Payments up to Rs 2,000 stay free, and person-to-person transfers remain free at any amount. Small merchants receiving up to Rs 1 lakh a month through UPI QR codes are fully exempt. Railways, telecom, insurance and fuel payments will carry a flat Rs 5 charge, while capital-market payments face 0.02 per cent, capped at Rs 300.

Finance Minister Nirmala Sitharaman has clarified that customers will not pay the charge. She said it is neither a tax nor a cess and will not be passed on to consumers. The fee will be shared by banks, payment firms and UPI apps to fund the ecosystem.

Trader bodies met the minister last week and several withdrew their October 2 ‘No UPI Day’ protest, though some associations are continuing it. A legal challenge to the framework is pending in the Supreme Court.