# Will UPI Cost You Money Now? The 0.4% Merchant Fee Explained > NPCI's 0.4% fee on UPI payments above INR 2,000 is paid by merchants, not you. Myth vs fact, who pays on INR 1,500 and INR 5,000, the start date and how to complain about a surcharge. - **Published**: 2026-11-01 - **Modified**: 2026-11-01 - **Category**: banking - **URL**: https://www.tldr.money/articles/banking/upi-merchant-fee-myth-vs-fact --- Forwards claiming "UPI is no longer free" have been doing the rounds since NPCI announced a merchant fee. This page answers one question: **will paying by UPI cost you anything?** It goes through the common myths, shows who pays what on real payment amounts, and explains what to do if a shop tries to charge you. For the full rate tables, see [UPI charges after Diwali](/articles/banking/upi-mdr-charges-explained). Background: [banking guides](/banking). **Last updated: 1 November 2026.** Educational, not advice. NPCI had not announced the start date when we wrote this; check NPCI, RBI or PIB for updates.
- **You don't pay.** The 0.4% fee is paid by the merchant, and NPCI says it **cannot be passed on** to you. - It applies only to payments **to merchants above INR 2,000**, capped at **INR 300** per payment. - **Free as before:** payments to friends and family, transfers between your own accounts, AutoPay mandates, and payments to small merchants (up to INR 1 lakh a month). - **Start date:** "immediately post Diwali", to be notified. Diwali is on 8 November 2026. - **Surcharge?** Refuse it, keep proof and report it.
## Myth vs fact | Myth | Fact (NPCI FAQ, updated 15 October 2026) | | --- | --- | | "UPI is no longer free for customers." | Consumers are not charged. The MDR is a fee merchants pay to accept payments. | | "My UPI app will add a fee." | Apps cannot charge consumers a platform fee for this. | | "Sending money to my family will cost 0.4%." | Person-to-person payments and self-transfers carry no MDR. | | "Shops can add 0.4% to my bill." | Merchants cannot pass the MDR on to customers. | | "Paying the vegetable seller by QR will cost me." | QR payments at small vendors are free for consumers, and small merchants up to INR 1 lakh a month pay zero MDR too. | | "There's now a monthly limit on free UPI." | There are no monthly caps for consumers. | | "My SIP and bill AutoPay will be charged." | AutoPay and mandates carry no MDR. | | "A INR 1 lakh payment costs INR 400 in fees." | The fee is capped at INR 300, and the merchant pays it. | NPCI also asks people to rely on PIB, RBI and NPCI for official information and not to forward rumours. ## Who pays what: worked examples
**INR 1,500 grocery bill.** It is below INR 2,000, so there is no MDR. **You pay INR 1,500. The shop pays INR 0.** **INR 5,000 electronics purchase.** It is above INR 2,000, so the 0.4% applies: INR 5,000 x 0.4% = INR 20. **You still pay INR 5,000. The shop pays INR 20** and receives INR 4,980 after the fee.
| Payment | Who you are paying | Fee (paid by the merchant) | You pay | | --- | --- | --- | --- | | INR 1,500 | Any merchant | INR 0 (INR 2,000 or less) | INR 1,500 | | INR 5,000 | Regular merchant | INR 20 (0.4%) | INR 5,000 | | INR 5,000 | Small merchant, up to INR 1 lakh a month | INR 0 | INR 5,000 | | INR 5,000 | Petrol pump or electricity bill | INR 5 flat | INR 5,000 | | INR 5,000 | A friend (P2P) | INR 0 | INR 5,000 | | INR 50,000 | Regular merchant | INR 200 | INR 50,000 | | INR 1,00,000 | Regular merchant | INR 300 (the cap) | INR 1,00,000 |
Different rules apply in a few areas. Railways, telecom, insurance, fuel and utilities, among others, pay a flat INR 5 on payments above INR 2,000. Education gets a flat or capped rate. Capital market payments pay 0.02%, capped at INR 300. Credit cards and credit lines on UPI follow separate rules. ### Why NPCI is bringing in the fee NPCI says UPI costs the industry about INR 20,000 crore a year to run, and the government subsidy was meant as bridge funding. For comparison, it cites credit card MDR of 1.5% to 2.5% and debit card MDR capped at up to 0.90%. UPI handled 2,451 crore transactions worth INR 29.9 lakh crore in August 2026. NPCI also says a fund will support small merchants, with the framework to be set within three months in consultation with RBI.
The **merchant discount rate** is the fee a shop pays to accept a digital payment. It is shared by the banks and apps that run the payment. You see it on card payments too; the shop pays it, not the card holder.
## When does it start? The fee was due on 15 October 2026. On 13 October NPCI said its UPI steering committee had decided, "keeping in mind the festive season", that it would be implemented "immediately post Diwali at a date to be notified separately". The Hindu reported that the decision followed appeals from traders, including the Confederation of All India Traders. WION reported that rollout was expected in the second week of November, but NPCI has not confirmed a date. The fee is also being challenged in court. On 28 September 2026 the Supreme Court refused to stay it and asked the Centre, RBI and NPCI to respond to the petition (Bar & Bench, Mint). ## What to watch for
Not allowed. NPCI says merchants cannot pass the MDR on to customers. Ask the shop to remove it, or pay another way.
NPCI says shelf prices should not rise because of the MDR. You can't force a shop's prices, but you can compare and complain.
Ignore forwards or links asking you to pay a UPI fee or "activate" free UPI. Check NPCI, RBI or PIB.
### How to complain 1. **At the shop:** refuse the surcharge, and keep the receipt or a screenshot of the payment. 2. **In your UPI app:** use its help or "report a problem" option for the transaction, and note the complaint reference. 3. **With your bank:** for problems with a UPI transaction on your account, such as a wrong debit, raise a complaint with your bank first. 4. **RBI Ombudsman:** if your bank or regulated entity doesn't reply within 30 days, or you aren't satisfied, you can complain under RBI's Integrated Ombudsman Scheme within 90 days at **cms.rbi.org.in**, by email to crpc@rbi.org.in, or by calling **14448**. It is free. ## Related - [UPI charges after Diwali: the full MDR rates](/articles/banking/upi-mdr-charges-explained) - [FD rates are rising: lock in now or build a ladder?](/articles/banking/fd-rates-rising-lock-in-now) - [Account aggregators and bank deposits in your CAS](/articles/banking/account-aggregator-cas-bank-deposits) - [Banking guides](/banking) ## Sources Links accessed 1 November 2026. - [NPCI, FAQs on Merchant Discount Rate (MDR) on select UPI (P2M) transactions, updated 15 Oct 2026](https://www.npci.org.in/uploads/FA_Qs_Merchant_Discount_Rate_MDR_on_Select_UPI_P2_M_Transactions_Updated_15_October_2026_a1f433513f.pdf): rates, cap and examples; consumer protections; small-merchant rules; sector rates; rationale; August 2026 volumes - [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): deferral and "date to be notified separately" - [The Hindu, NPCI pushes back UPI MDR rollout to 'immediately after Diwali', 13 Oct 2026](https://www.thehindu.com/business/upi-mdr-on-select-merchant-transactions-shall-be-implemented-post-diwali/article71578558.ece): background to the deferral and traders' appeals - [WION, NPCI postpones UPI MDR charges rollout to post-Diwali, second week of November, Oct 2026](https://www.wionews.com/india-news/npci-postpones-upi-mdr-charges-rollout-to-post-diwali-second-week-of-november-1791882766290): reported timing (not confirmed by NPCI) - [Bar & Bench, Supreme Court refuses to stay Centre's decision to levy MDR on merchant UPI transactions over INR 2,000, 28 Sep 2026](https://www.barandbench.com/news/litigation/supreme-court-refuses-to-stay-centres-decision-to-levy-mdr-on-merchant-upi-transactions-over-2000): no stay - [Mint, UPI MDR row: SC refuses interim stay, asks Centre and RBI to file counter affidavits within 4 weeks, Sep 2026](https://www.livemint.com/money/upi-mdr-row-sc-refuses-interim-stay-on-the-levy-asks-centre-rbi-to-file-counter-affidavits-in-4-weeks-11790581991588.html): responses sought - [RBI, FAQs on the Reserve Bank - Integrated Ombudsman Scheme, updated 1 Jul 2026](https://www.rbi.org.in/CommonPerson/English/scripts/FAQs.aspx?Id=3407): complaint steps, 30-day and 90-day limits, cms.rbi.org.in, crpc@rbi.org.in, 14448 - [NDTV Profit, November 2026 festival calendar](https://www.ndtvprofit.com/india/november-2026-festival-calendar-check-dhanteras-diwali-bhai-dooj-dates-12262703): Diwali on 8 November 2026 - Worked examples: tldr.money calculation from NPCI's rates. --- - [More banking articles](https://www.tldr.money/articles/category/banking) - [All articles](https://www.tldr.money/articles)