New UPI Rules 2026: What the Latest Government Announcement Means for Users

The Unified Payments Interface (UPI) has transformed the way people make digital payments in India. From everyday purchases to transferring money, UPI has become an integral part of the country's digital payment ecosystem.

A recent Government of India announcement on the amendment to the Payment and Settlement Systems Act, 2007, has led to questions about whether UPI payments will now attract charges.

The Government has clarified that consumers will not face transaction charges for making UPI payments. Person-to-person (P2P) transactions will also continue to remain free. The amendment is an enabling provision aimed at supporting UPI's long-term sustainability, technological advancement and resilience against emerging risks. It does not introduce a blanket charge for UPI users.

The latest announcement focuses on creating a framework that can support the continued growth and sustainability of UPI. If Merchant Discount Rate (MDR) is introduced in the future, it will apply only to a limited set of merchant transactions above a certain threshold and at a nominal rate. The Government has also clarified that the vast majority of merchant transactions on UPI will remain free. The exact threshold, applicable transactions and MDR rate have not yet been finalised.

No. UPI remains free for consumers. The Government has categorically stated that consumers making payments will not face transaction charges. This means users can continue making their regular UPI payments without an additional transaction fee. P2P transactions, such as transferring money to family or friends, will also continue to remain free. 

MDR, or Merchant Discount Rate, is a fee associated with processing certain merchant payments. Under the proposed framework, any future UPI MDR would be applicable only to a limited set of merchant transactions above a specified threshold. It would be nominal and significantly lower than MDR applicable to debit or credit card transactions, as stated by the Government.

Importantly, MDR would not be a charge on consumers. The Government has also clarified that MDR, if introduced, would not be levied as a blanket charge across all UPI merchant transactions. 

No. The framework is yet to be finalised. The Government has stated that once Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, proposing an amendment to Section 10A of the Payment and Settlement Systems Act, 2007, the UPI and Services Steering Committee headed by NPCI will decide on MDR, if any. Therefore, any specific MDR rate or transaction threshold currently being circulated should not be considered a confirmed UPI rule unless officially notified.

UPI's rapid growth requires continued investment in cybersecurity, fraud prevention, infrastructure and technology. The Government has said the amendment is intended to support a more sustainable and competitive UPI ecosystem while enabling its continued expansion.

According to the Ministry of Finance, UPI processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026, highlighting its scale in India's digital payments ecosystem. UPI is also live in 11 foreign countries. 

The latest announcement does not mean that consumers will start paying for UPI. UPI will remain free for citizens, and P2P transactions will continue to be free. Any future MDR would be limited to specified merchant transactions above a threshold and charged at a nominal rate. The final MDR framework is yet to be decided.

For now, users can continue making their everyday UPI payments as usual and should rely on official information from the Government, RBI and NPCI for future updates.

Disclaimer: *Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.