India Passes Bill Allowing 0.3%-0.5% Fees on Select UPI Payments
Updated
Updated · The Tribune India · Aug 16
India Passes Bill Allowing 0.3%-0.5% Fees on Select UPI Payments
3 articles · Updated · The Tribune India · Aug 16
Summary
Parliament approved the Taxation and Other Laws (Amendment) Bill, 2026, creating legal room for the government to levy a Merchant Discount Rate on some UPI transactions, though no charge has been imposed yet.
The move targets funding for a payments system that has run on a zero-fee model since UPI’s 2016 launch, even as the Centre continues to say consumer-facing UPI remains free.
Current proposals point to a 0.3%-0.5% fee on larger merchant payments, while person-to-person and consumer transactions would stay exempt.
UPI processed 23.6 billion transactions in July alone, and the proposed merchant fee could raise as much as $1 billion to support banks, payment firms and infrastructure.
Will large Indian retailers pass the new UPI merchant fees onto consumers, ending the true era of free digital payments?
How will the revenue from India's upcoming UPI merchant charges be split among banks, fintech apps, and the government?
UPI’s 2026 MDR Overhaul: What India’s New Merchant Fee Law Means for E-Commerce, Retail, and Small Businesses
Overview
In August 2026, India passed a landmark bill enabling merchant fees on UPI transactions, ending the era of zero-cost digital payments for large businesses. The new law gives the government direct authority to set fees and shifts regulatory oversight to the RBI. However, over 95% of UPI transactions and 90% of merchants remain exempt, as the nominal fee applies only to high-value payments at large merchants. Strict consumer protections ensure no surcharges for users. This targeted approach aims to make the digital payment system financially sustainable, encourage private investment, and fund infrastructure upgrades, while preserving free payments for everyday consumers and small businesses.