Public concern increased after Parliament passed the Taxation and Other Laws Amendment Bill 2026. Many people wondered whether future UPI payments would attract charges. However, Finance Minister Nirmala Sitharaman clarified that ordinary consumers will continue using UPI completely free. Meanwhile, the government needs funding for infrastructure and cybersecurity costs supporting the payment network. Therefore, officials have prepared two possible formulas for reducing that financial burden.
The ministry explained both options in its July 17 response to Parliament’s Standing Committee on Finance. First, officials may examine reintroducing MDR for certain large transactions or merchants. Second, authorities may create a tiered incentive structure. This model could gradually reduce government support during coming years. In simpler terms, authorities may charge a small Merchant Discount Rate on larger commercial transactions. This approach could help banks and payment companies recover operating expenses.
Sources say discussions involve businesses with annual turnover above ₹1.5 crore. The possible framework may also cover commercial payments exceeding ₹2,000. However, no final decision has emerged yet.
Government Support Falls Far Below Estimated Industry Costs
Under the second formula, the government has already allocated ₹2,000 crore through the Budget. This support promotes digital payments and compensates smaller merchants for zero-MDR losses. However, the industry estimates annual operational costs at ₹20,700 crore. Therefore, the current allocation remains far below that estimated requirement. Legal provisions now allow calibrated MDR on higher-value transactions. Yet authorities still need to notify and implement the framework.
Any delay could increase payment service providers’ dependence on insufficient subsidies. Consequently, necessary investment in cybersecurity could face pressure.
Fraud prevention may also suffer from inadequate funding. Furthermore, network infrastructure requires continued investment for reliable digital payment operations.
What Could These Changes Mean for Ordinary UPI Users?
People sending money to friends or relatives through UPI will pay no charge. Similarly, customers scanning QR codes at vegetable sellers, tea stalls, or local grocery stores will face nothing extra. However, larger shopping malls or showrooms may fall under a different arrangement. Merchants crossing ₹1.5 crore annual turnover could face a small MDR. According to the reference, this proposed fee would remain lower than credit or debit card charges. MDR means Merchant Discount Rate. A shopkeeper pays this fee to banks and payment companies for accepting digital transactions.
Therefore, customers do not directly pay MDR from their own pockets. Instead, the merchant bears that cost. The government plans possible MDR between 0.3% and 0.5% on UPI transactions above ₹2,000. However, authorities may restrict this charge to larger merchants exceeding ₹1.5 crore yearly turnover. Small shopkeepers would remain outside this proposed framework. Likewise, ordinary consumers would continue using UPI without direct charges.
