New Delhi, August 8, 2026: Government of India has clarified that users will not have to pay transaction charges for making payments through the Unified Payments Interface (UPI), amid debate over a recent amendment to the Payment and Settlement Systems Act.
The government said all person-to-person (P2P) UPI transactions will remain free, while consumers will not face transaction charges for making UPI payments. The government also clarified that any future Merchant Discount Rate (MDR), if introduced, will apply only to a limited category of merchant transactions above a specified threshold. Such charges will be nominal and significantly lower than the MDR applicable to debit and credit card transactions.
The vast majority of merchant transactions on UPI will continue to remain free, the government said.
NPCI panel to decide on MDR
The clarification comes after the recent amendment to the Payment and Settlement Systems Act, 2007 triggered concerns that UPI users could eventually face transaction charges. The government said the amendment is an enabling provision aimed at ensuring the long-term sustainability, technological development and resilience of India's digital payment infrastructure.
If Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes changes to Section 10A of the PSS Act, the UPI and Services Steering Committee headed by NPCI will decide whether MDR should be introduced and, if so, how it should be structured.
Why the government wants a new framework
The government said UPI's rapid growth requires continuous investment in cybersecurity, fraud prevention and digital infrastructure. It also wants to encourage more companies to participate in the UPI ecosystem and create greater competition. According to the government, a sustainable revenue model will help support the next phase of UPI's expansion.
The government said relying only on subsidies may not be sustainable as transaction volumes and infrastructure requirements continue to grow.
Government rejects reports of external pressure
The government rejected reports suggesting that external influences were behind the proposed policy changes, calling such claims “unfounded” and “misleading”. It pointed out that India launched UPI in 2016 and has kept it free for citizens and merchants since January 2020.
The government described UPI as an Indian innovation and said it remains committed to keeping the service free for citizens while building a sustainable payment ecosystem.
UPI processes ₹29.9 lakh crore in July
UPI has grown into the world's largest real-time payment system since its launch in 2016–17. According to the government, UPI processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone.
UPI is currently live in 11 foreign countries, while several other countries have expressed interest in adopting or integrating the system. The government said the next phase of UPI's growth will focus on expanding digital payments in rural and semi-urban areas while maintaining affordability, security and competitiveness.
The government urged citizens to rely on official information from the Ministry of Finance, the Reserve Bank of India and NPCI and avoid forwarding unverified messages about UPI charges.
Keywords: UPI charges, UPI MDR, UPI India, UPI transactions, Payment and Settlement Systems Act, UPI July 2026