UPI Charges Explained Simply: What Shoppers and Shopkeepers Should Know

Imagine buying a school bag for ₹3,000.

You scan the shop’s QR code and pay with UPI.

Will you now have to pay extra?

Under the announced rules, customers will continue to use UPI for free. From 15 October 2026, some shops will pay a fee for accepting certain payments. [NPCI’s official guide] Let’s understand this with simple examples.

1. What is changing?

The Government changed the law that governs digital payments. The change lets it specify which payment methods must remain free from bank and payment-provider charges. [The legal amendment]

Under the new framework, certain shops will pay a fee when customers pay them through UPI.

This fee is called MDR. Think of it as a payment-handling fee paid by the shop.

Here are the main rules:

• Sending money to friends or family stays free.

• Shop payments of ₹2,000 or less stay free of this merchant fee.

• Qualifying small shops in the special P2PM category, receiving up to ₹1 lakh a month through UPI QR codes, remain protected.

• Other eligible shop payments above ₹2,000 generally attract a 0.4% fee, with a maximum of ₹300 per payment.

• Some types of businesses have different rates. [Government’s explanation]

Being a small shop does not automatically establish eligibility. The shop should confirm its category with its bank.

The school-bag example

Suppose the standard fee applies:

The ₹12 is before any tax on the fee. Shops covered by an exemption or special rate will have different treatment. NPCI’s fee rules

2. Why introduce a fee?

Think of UPI as a bridge between your bank and the shop’s bank.

That bridge needs care.

Computers must keep working. Payments must move safely. Problems must be fixed. Systems must improve as more people use them.

The Government says the fees will help fund payment infrastructure, security and wider access. It also says government support alone cannot fund UPI’s next stage of growth. Government’s reasons

The aim is to help pay for the system that makes the payment possible.

3. What should shoppers and shopkeepers do?

If you are shopping:

Check the bill and the amount shown before paying. Merchants cannot pass this MDR fee directly to customers. If an unexplained UPI charge appears, ask for an explanation and keep the bill. NPCI’s consumer safeguards
If you run a shop:

Ask your bank three simple questions:

1. Does this fee apply to my shop?

2. What rate applies?

3. How will the deductions appear in my statement?

Get the answers in writing. This will help you spot incorrect charges later.

4. My view: even a small fee deserves attention

A ₹12 fee may look small.

But imagine the shop earned ₹60 from that sale before paying the processing fee. After paying ₹12, only ₹48 remains, before other relevant costs and taxes.

This is an example, but it explains why shopkeepers may be concerned.

I believe a good payment system needs money to stay reliable. Shopkeepers also deserve clear charges and good service.

The real test will be whether payments become more dependable and problems get resolved more quickly.

5. A CA’s advice: keep the numbers clear

Think of your business records as three separate boxes:

• Money customers paid

• Fees and taxes deducted

• Money received in the bank

Check that these boxes match.

If the bank receives less because a fee was deducted, record the fee separately. Do not automatically treat the smaller bank deposit as the value of the sale.

Also check GST—the tax that can apply to the payment-handling fee. This is separate from the amount the customer transfers. CBIC’s financial-services tax rates

Some businesses can use eligible GST paid on fees to reduce their own GST bill. This depends on the rules and supporting documents; it is not automatic. GST credit rules

Before changing how your shop accepts payments, look at the actual cost, the time saved and what your customers prefer.

Good financial decisions start with understanding the bill—and keeping a clear record of it.