From October 15, 2026, paying a merchant more than Rs 2,000 through UPI will attract a 0.4% fee. Here is what the change means for you.

The fee applies only to person-to-merchant payments above Rs 2,000. It is capped at Rs 300 per transaction. Person-to-person transfers – money sent to friends and family – remain completely free.

For railways, telecom, insurance and fuel payments above Rs 2,000, a flat Rs 5 fee applies instead of the percentage charge.

The government says 96% of gateway transactions are exempt, since most UPI payments are below the Rs 2,000 threshold.

Who actually pays? The merchant discount rate is typically borne by the merchant, not the customer. But small shops may pass it on or nudge customers toward cash.

The fee ends nearly six years of fully free UPI for merchants. The government argues the charge is needed to sustain the payments infrastructure.

The levy is facing a legal challenge. The Supreme Court on September 28 refused an interim stay but asked the Centre, RBI and NPCI to respond within four weeks.

What to do: for large merchant payments, check whether the merchant adds the fee before you pay.