UPI Transactions and Charges: Important Update
UPI transactions are now set to remain free for amounts up to Rs 2,000, as stated by the Centre, which has confirmed that banks and payment service providers cannot charge customers for these transactions or payments made via RuPay-powered debit cards. The Finance Ministry issued a notification on Monday, clarifying that no financial institution or service provider can impose any fees, either directly or indirectly, on individuals making or receiving payments using these designated electronic methods.
Details of the Notification
The government has designated RuPay-powered debit cards and UPI transactions below Rs 2,000 as the electronic methods exempt from charges. Both UPI and RuPay are overseen by the National Payments Corporation of India (NPCI). However, the notification did not mention any non-charge provision for UPI transactions exceeding Rs 2,000, which suggests the possibility of introducing a merchant discount rate (MDR) for transactions of higher value.
Background on Recent Amendments
This notification follows the Taxation and Other Laws (Amendment) Act, 2026, which amended the Payment and Settlement Systems Act, 2007. This amendment empowers the Centre to specify which electronic payment methods banks and service providers cannot charge for. Passed in August, the modification replaced the previous rule that safeguarded electronic modes under the Income-tax Act from such fees.
Implications of the Amendment
The updated legislation permits the government to identify various modes and categories of transactions that will remain free from charges. This comes in light of ongoing conversations regarding a potential MDR framework for UPI. The government noted that the amendment does not enforce any fees on UPI users directly. Any proposed MDR is anticipated to affect specific merchant transactions, while person-to-person UPI payments will retain their charge-free status.
Latest Specifications on UPI Transactions
The recent notification clearly identifies UPI transactions for amounts up to Rs 2,000 and payments made through RuPay-powered debit cards as exempt from charges. Notably, it does not introduce any MDR or define any rates for UPI transactions that exceed Rs 2,000.