Government Clarifies UPI Free Status Following Legislative Amendments
The Indian government confirmed that UPI transactions will remain free for consumers and most merchants despite recent legislative changes. Any future fees will be nominal, threshold-based, and managed by the NPCI to ensure system sustainability.
Key takeaways
- Consumer and person-to-person UPI transactions will remain entirely free of charge.
- The vast majority of merchant transactions will not attract fees, with any future MDR limited to specific high-value thresholds.
- Legislative amendments to the Payment and Settlement Systems Act are enabling provisions for sustainability, not immediate tax mandates.
- The NPCI-led Steering Committee will determine future fee structures to support cybersecurity and infrastructure costs.
What Happened
On August 8, 2026, the Indian government issued a statement to address speculation regarding the introduction of fees on the Unified Payments Interface (UPI). The clarification follows the Lok Sabha passing the Taxation and Other Laws (Amendment) Bill, 2026, which modifies Section 10A of the Payment and Settlement Systems Act, 2007. While this amendment allows for the potential levying of charges, the government maintains that all person-to-person transactions will remain free of cost.
Why It Matters
The legislative change serves as an enabling provision rather than an immediate mandate for fees. The government argues that relying solely on subsidies is unsustainable as transaction volumes continue to rise. A balanced revenue model is deemed necessary to fund infrastructure upgrades, enhance cybersecurity, and prevent fraud. By allowing for a nominal Merchant Discount Rate (MDR) on specific high-value transactions, the government aims to encourage market competition and self-sustainability for service providers without burdening the general public or small businesses.
Key Facts
- UPI processed 2,366 crore transactions totaling ₹29.9 lakh crore in July 2026 alone.
- All person-to-person (P2P) transactions will remain free for users.
- Future merchant charges, if implemented, will be threshold-based and lower than current credit or debit card rates.
- The UPI and Services Steering Committee, led by the National Payments Corp. of India (NPCI), will hold the authority to decide on MDR levels.
- UPI is currently operational in 11 foreign countries.
- Merchant transactions have been free of charge since January 2020.
What Happens Next
Once the Taxation and Other Laws (Amendment) Bill, 2026, completes its passage through Parliament, the NPCI-led Steering Committee will be responsible for defining the specific thresholds and rates for any future MDR. The government expects these measures to facilitate the next wave of growth for the digital payment ecosystem, ensuring the platform remains resilient against emerging technological risks.
Sources reviewed
Project Chintan independently synthesized and analyzed information cross-checked across the sources listed above.
