With speculation over proposed charges on UPI transactions continuing to grow, Finance Minister Nirmala Sitharaman on Monday reiterated that consumers will not have to pay any charges for UPI transactions. She said the amendment under the Taxation and Other Laws (Amendment) Bill, 2026, is only an enabling provision and does not impose any tax or transaction charge on UPI users.
Sitharaman said no Merchant Discount Rate (MDR) framework has yet been finalised. The UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), will consider and decide whether any MDR should be introduced and, if so, its scope and structure.
The finance minister was responding to the debate on the Taxation and Other Laws (Amendment) Bill, 2026, which was passed by the Rajya Sabha on Monday.
“UPI has remained free for consumers since its launch, and every Indian will continue to make instant digital payments without paying a transaction charge,” Sitharaman said.
She added that any future MDR would apply only to a limited category of merchant transactions above a prescribed threshold.
Responding to concerns that merchants could pass on the burden of MDR to consumers if charges are imposed above a certain threshold, Sitharaman said merchants routinely pay MDR of around 1.5-2% or more on credit cards and up to 0.90% on debit cards.
“Yet major retailers generally do not add a separate charge to customers,” she said. According to Sitharaman, merchants already bear payment acceptance costs because digital payments help drive higher sales and large-ticket purchases.
“A large number of electronic purchases are financed through EMI in one form or another. Customers often choose a card specifically because of EMI and issuer-funded offers,” she said.
Sitharaman said UPI is currently the least attractive option in this category despite having zero MDR. Unlike credit cards, there are currently no rewards or issuer-funded discounts on UPI, she said.
The finance minister also compared merchant or payment acceptance charges across major fast-payment ecosystems.
“In Australia, the charge can be up to 0.3 Australian dollars per transaction. Brazil has charges of around 0.22-0.33%. China has charges of approximately 0.40%, Indonesia around 0.30%, South Korea 0.72-1.99%, Singapore around 1.30%, Thailand up to 10 units of its currency and the US around 0.5%,” she said.
Sitharaman said UPI is the world's largest real-time payment system. “In July 2026 alone, it processed 2,366 crore transactions worth Rs29.9 lakh crore.”
Small vendors and traders are increasingly using digital payments through QR codes and other mechanisms and will continue to be an important part of the digital payments ecosystem, she said.
