From October 15, 2026, UPI merchant payments above Rs 2,000 will carry a 0.4 per cent merchant discount rate. The big question: who actually pays it? The answer is the merchant’s payment chain – not you.

Here is how it works. If you pay Rs 3,000 to a shop through UPI, the merchant’s side bears Rs 12. On Rs 50,000, the charge is Rs 200. For payments of Rs 75,000 and above, the fee is capped at Rs 300. Your bill stays exactly the same.

The money is split between banks, payment service providers and UPI apps. It funds the cost of running UPI – servers, fraud prevention and bank systems – which the industry estimates at about Rs 20,000 crore a year. It is not a government tax.

You pay nothing extra in three common cases: transfers to friends and family, any merchant payment up to Rs 2,000, and payments to small merchants doing up to Rs 1 lakh a month through QR codes.