{"id":392911,"date":"2026-08-10T17:00:09","date_gmt":"2026-08-10T11:30:09","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=392911"},"modified":"2026-08-10T17:13:20","modified_gmt":"2026-08-10T11:43:20","slug":"no-charges-upi-users-government-clarifies-mdr","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2026\/08\/10\/no-charges-upi-users-government-clarifies-mdr\/","title":{"rendered":"No Charges on UPI Payments: Government Clarifies What the PSS Act Amendment Really Means"},"content":{"rendered":"<div style=\"text-align: justify; line-height: 150%;\">\n<p style=\"margin-bottom: 3%;\">On 8 August 2026, the Ministry of Finance clarified that UPI users will continue to make payments without any transaction charges, despite the proposed amendment to Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-9000260195\" target=\"_blank\">10A<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002742146\" target=\"_blank\">Payment and Settlement Systems Act, 2007<\/a> through the Taxation and Other Laws (Amendment) Bill, 2026.<\/p>\n<p style=\"margin-bottom: 3%;\">The Government stated that the amendment is intended to support the long-term growth, sustainability and security of India&#8217;s digital payments ecosystem.<\/p>\n<p style=\"font-weight: bold;\">Key Clarifications and Assurances:<\/p>\n<ol style=\"list-style-type: decimal;\">\n<li>\n<p>The Government has reiterated that UPI users will continue to make payments without any transaction charges, and all <span style=\"font-weight: bold;\">person-to-person<\/span> (P2P) transactions will remain free.<\/p>\n<\/li>\n<li>\n<p>The vast majority of merchant transactions on UPI will also remain free of charge.<\/p>\n<\/li>\n<li>\n<p>If <span style=\"font-weight: bold;\">Merchant Discount Rate<\/span> (MDR) is introduced in the future, it will apply only to a limited category of merchant transactions above a specified threshold and will not be levied universally across UPI transactions.<\/p>\n<\/li>\n<li>\n<p>Any future MDR, if introduced, is expected to be <span style=\"font-weight: bold;\">nominal and substantially lower than the MDR applicable to debit and credit card transactions<\/span>.<\/p>\n<\/li>\n<li>\n<p>The proposed amendment to Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-9000260195\" target=\"_blank\">10A<\/a> of the <span style=\"font-weight: bold;\"><a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002742146\" target=\"_blank\">Payment and Settlement Systems Act, 2007<\/a><\/span> is only an enabling provision and does not automatically impose MDR on UPI transactions.<\/p>\n<\/li>\n<li>\n<p>Once the <span style=\"font-weight: bold;\">Taxation and Other Laws (Amendment) Bill, 2026<\/span> is enacted, the NPCI-led &#8220;<span style=\"font-weight: bold;\">UPI and Services Steering Committee<\/span>&#8221; will decide whether MDR is required and, if so, determine its structure.<\/p>\n<\/li>\n<li>\n<p>The amendment replaces the reference to electronic payment modes prescribed under income-tax provisions with payment modes that may be notified by the Central Government under Section <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-9000260195\" target=\"_blank\">10A<\/a> of the <a href=\"https:\/\/www.scconline.com\/DocumentLink.aspx?q=JTXT-0002742146\" target=\"_blank\">Payment and Settlement Systems Act, 2007<\/a>.<\/p>\n<\/li>\n<li>\n<p>The Government stated that UPI&#8217;s rapid growth requires sustained investment in cybersecurity, fraud prevention, technology upgrades and digital infrastructure.<\/p>\n<\/li>\n<li>\n<p>According to the Government, the next phase of UPI&#8217;s expansion requires a sustainable financial model, as reliance on subsidies alone may not be sufficient in the long run.<\/p>\n<\/li>\n<li>\n<p>The amendment is aimed at ensuring UPI&#8217;s long-term sustainability, increasing competition, supporting service providers and strengthening resilience against emerging risks.<\/p>\n<\/li>\n<li>\n<p>The Government has rejected reports suggesting that policy changes are being driven by external influences, describing such claims as false and misleading.<\/p>\n<\/li>\n<li>\n<p>Since its launch in 2016-17, UPI has grown into the world&#8217;s largest real-time payment system and has remained free for users and merchants since January 2020.<\/p>\n<\/li>\n<li>\n<p>In July 2026 alone, <span style=\"font-weight: bold;\">UPI processed 2,366 crore transactions<\/span> worth approximately &#8377;29.9 lakh crore.<\/p>\n<\/li>\n<li>\n<p><span style=\"font-weight: bold;\">UPI is currently operational in 11 countries<\/span>, with several others expressing interest in adopting the platform.<\/p>\n<\/li>\n<li>\n<p style=\"margin-bottom: 3%;\">The Government stated that the next phase of UPI growth will focus on expanding digital payments in rural and semi-urban areas while maintaining affordability, inclusiveness and global competitiveness.<\/p>\n<\/li>\n<\/ol>\n<p style=\"margin-bottom: 3%;\">Also Read: <a href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/08\/07\/taxation-and-other-laws-amendment-bill-2026-lok-sabha\/\" target=\"_blank\">Lok Sabha Passes Taxation and Other Laws (Amendment) Bill, 2026: Wide-Ranging Reforms for Digital Payments, Funds and Manufacturing<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p style=\"font-style: italic;\">Government has clarified that UPI will remain free for consumers and person-to-person transactions, while any future Merchant Discount Rate (MDR), if introduced, will be limited, threshold-based and applicable only to certain merchant transactions.<\/p>\n","protected":false},"author":67525,"featured_media":392922,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,1193],"tags":[44235,111977,111979,111749,111744,111976,111981,111978,111980,111982],"class_list":["post-392911","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legislationupdates","category-notifications","tag-digital-payments","tag-no-charges-for-upi-users","tag-npci-upi-steering-committee","tag-payment-and-settlement-systems-act-amendment","tag-taxation-and-other-laws-amendment-bill-2026","tag-upi-charges-clarification","tag-upi-free-transactions","tag-upi-mdr-2026","tag-upi-merchant-charges","tag-upi-sustainability"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Government Clarifies: No Charges for UPI 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