# UPI Charges After Diwali: MDR Explained

> Will you pay to use UPI after Diwali? No. NPCI's 0.4% MDR applies to larger merchants on payments above INR 2,000, capped at INR 300. Who pays what.
- **Published**: 2026-10-18
- **Modified**: 2026-10-18
- **Category**: banking
- **URL**: https://www.tldr.money/articles/banking/upi-mdr-charges-explained

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Payments are one part of our [banking guide](/banking). This page clears up **UPI charges after Diwali**: what the merchant discount rate (MDR) is, who pays it, and why your own UPI payments stay free.

## UPI charges after Diwali: the short answer

You will not pay to use UPI. The National Payments Corporation of India (NPCI), which runs UPI, has said in its FAQ dated 15 September 2026 that:

- consumers are not charged MDR;
- payment apps cannot charge a platform fee for UPI payments;
- merchants cannot pass the MDR on to customers;
- person-to-person (P2P) transfers stay free.

The fee is paid by larger merchants, out of what they receive.

## What is MDR?

The merchant discount rate is the fee a shop or business pays on each digital payment it accepts. Card payments carry one. Most UPI merchant payments have not, and that is what changes for larger merchants.

## The new UPI MDR rates

| Payment type | MDR |
|---|---|
| Person-to-merchant (P2M), up to INR 2,000 | Nil |
| P2M above INR 2,000 | 0.4%, capped at INR 300 per payment |
| Railways, telecom, insurance, fuel and utilities, above INR 2,000 | Flat INR 5 per payment |
| Capital markets | 0.02%, capped at INR 300 |
| Small merchants (P2PM, up to INR 1 lakh a month) | Nil |
| UPI AutoPay mandates | Nil |
| Person-to-person transfers | Free |

### Worked examples for a merchant

| Payment | MDR the merchant pays |
|---|---|
| INR 1,500 | INR 0 |
| INR 3,000 | INR 12 |
| INR 50,000 | INR 200 |
| INR 75,000 | INR 300 (the cap) |
| INR 1,50,000 | INR 300 (the cap) |

## When does it start?

The MDR was scheduled to begin on 15 October 2026. On 13 October NPCI said it would be implemented "immediately post Diwali", on a date to be notified separately. Business Standard reported that UPI handled an average of 802 million transactions a day in September 2026.

## What to do if a shop asks you to pay extra

Under NPCI's rules, a merchant cannot pass the MDR on to you. If a shop adds a "UPI fee", you can refuse it, pay another way, and report it through your UPI app's help section.

## UPI for IPO applications

UPI is also how most retail investors pay for IPO bids, but that is not a shop payment. Under SEBI's ASBA system, your bank blocks the bid amount when you approve the mandate and debits it only if you are allotted shares. See [how to apply for the Jio IPO](/articles/ipo/how-to-apply-jio-ipo) for the steps and the mandate deadline.

## If you run a small business

If your UPI receipts are within INR 1 lakh a month on a small-merchant account, you pay nothing. Above that, the 0.4% applies only to payments over INR 2,000, with a INR 300 cap. Freelancers and consultants who are paid by UPI should note this when setting prices; our guide to [tax saving for freelancers](/articles/tax-planning/tax-saving-for-freelancers) covers the tax side of running your own practice.

RBI is also making it easier to see all your accounts in one place. See [account aggregators and bank deposits in your CAS](/articles/banking/account-aggregator-cas-bank-deposits).

## Sources

- NPCI, FAQs on Merchant Discount Rate (MDR) on select UPI (P2M) transactions, 15 Sep 2026: https://www.npci.org.in/uploads/FA_Qs_Merchant_Discount_Rate_MDR_on_Select_UPI_P2_M_Transactions_58dba1d39e.pdf
- NPCI, UPI MDR on select merchant transactions shall be implemented post Diwali, 13 Oct 2026: https://www.npci.org.in/uploads/UPI_MDR_on_Select_Merchant_Transactions_Shall_be_Implemented_Post_Diwali_4c9cdd77d5.pdf
- Business Standard, UPI MDR deferred until after Diwali, 13 Oct 2026: https://www.business-standard.com/finance/news/upi-mdr-deferred-until-after-diwali-new-date-to-be-notified-npci-126101300556_1.html
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