Context: Ministry of Finance notified that no bank/system-provider charge can be imposed on UPI transactions up to ₹2,000 or RuPay debit-card payments.
- Charges on higher-value Person-to-Merchant (P2M) UPI transactions may now be enabled; actual Merchant Discount Rate (MDR) is yet to be decided.
- Section 10A, Payment and Settlement Systems Act, 2007: Earlier barred charges on electronic modes prescribed under Section 269SU, Income Tax Act, 1961.
- Taxation and Other Laws (Amendment) Act, 2026: Amended Section 10A, removing the blanket exemption and enabling MDR on specified higher-value transactions.
- Section 269SU: Applies to businesses with turnover > ₹50 crore; mandates prescribed electronic payment facilities.
- Earlier prescribed modes: RuPay debit cards, BHIM-UPI and UPI-QR code.
- P2P (Person-to-Person) payments and low-value transactions ≤₹2,000 remain charge-free.
- Merchant Discount Rate (MDR): Fee paid by merchant to banks/payment ecosystem for processing digital payments. Generally 1–3% for debit/credit cards. No MDR on UPI and RuPay debit cards since January 2020, to promote digital-payment adoption. Proposed higher-value UPI MDR could be around 0.4–0.5%, but this is not yet notified.
UPI & Subsidy
- 2025–26: >24,000 crore UPI transactions worth about ₹314 lakh crore.
- Only 4% of P2M UPI transactions exceeded ₹2,000, but they represented nearly two-thirds of P2M transaction value.
- Government incentive for low-value BHIM-UPI and RuPay transactions to small merchants: capped at 0.15% of transaction value.
- Large merchants are excluded from this incentive scheme.
- Budget 2026–27 estimated subsidy: ₹2,000 crore.
- Subsidy paid: ₹2,196.21 crore (2025–26); ₹1,922.77 crore (2024–25).
- Decision on MDR for higher-value P2M UPI transactions will be taken by the UPI and Services Steering Committee, headed by National Payments Corporation of India (NPCI).
- Committee includes 22 members, including banks, third-party application providers, Payments Council of India and Indian Banks’ Association.
- UPI is an instant payment system developed by NPCI, enabling inter-bank transactions through mobile platforms; it operates on the Immediate Payment Service (IMPS) infrastructure.
