The Central Government has issued a notification clarifying the treatment of charges on certain digital payment transactions. Under the new framework, UPI transactions of up to ₹2,000 cannot be subjected to a direct or indirect charge by banks or payment system providers.
The notification was issued by the Department of Financial Services on September 14, 2026, under Section 10A of the Payment and Settlement Systems Act, 2007. It covers UPI payments up to the specified limit as well as payments made through RuPay-powered debit cards.
What the New UPI Rule Means
The main purpose of the notification is to ensure that users are not charged when making UPI payments of up to ₹2,000.
For these transactions, the person making the payment and the recipient are protected from direct or indirect charges imposed by a bank or payment system provider.
The government has also clarified that person-to-person UPI transfers will continue to be free regardless of the amount transferred. This means the new framework does not introduce a fee for individuals sending money to other individuals through UPI.
UPI Payments Below ₹2,000
Payments made to merchants through UPI for amounts up to ₹2,000 remain within the no-charge framework.
This is particularly relevant for everyday digital payments such as purchases from small shops, local businesses and other merchants accepting UPI.
According to the government, approximately 96% of merchant UPI transactions remain unaffected under the framework.
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What About UPI Payments Above ₹2,000?
The notification reported by Law Trend specifically establishes protection from charges for UPI transactions up to ₹2,000. It does not itself prescribe a Merchant Discount Rate (MDR) for UPI transactions above ₹2,000.
The Finance Ministry’s separate clarification, however, states that MDR may apply to specified merchant transactions above ₹2,000. The government says MDR is an industry-level charge and is not a fee that customers should be required to pay when using UPI. Banks have been advised to ensure that merchants do not pass the MDR cost on to customers.
UPI Transactions Between Individuals Remain Free
One important aspect of the government’s clarification is that person-to-person UPI payments remain free irrespective of the transaction amount.
Therefore, sending money to another individual through UPI does not become chargeable merely because the amount exceeds ₹2,000.
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Small Merchants Also Receive Protection
The framework also contains provisions for small merchants. The government has said that eligible small merchants receiving payments through UPI QR codes under the specified P2PM category can continue to benefit from zero MDR.
This provision is intended to protect small businesses, neighbourhood stores and street vendors from additional payment-related costs.
Why the ₹2,000 Threshold Matters
UPI has become one of India’s most widely used digital payment systems, particularly for low-value everyday purchases.
The government estimates that around 96% of merchant transactions will remain unaffected because they either fall within the ₹2,000 threshold or qualify for the applicable zero-MDR framework for small merchants.
The framework is intended to balance continued access to free digital payments with the financial sustainability of the broader UPI payment ecosystem.
What UPI Users Should Know
For ordinary users, the key points are:
- UPI payments between individuals remain free.
- Merchant UPI payments up to ₹2,000 remain free of MDR.
- Customers are not supposed to be charged MDR separately.
- The notification also covers specified RuPay debit-card payments.
- The notification itself does not establish an MDR for UPI payments above ₹2,000.
- Separate government provisions address MDR for certain larger merchant transactions.
UPI Continues to Support Digital Payments
The government’s framework comes as UPI continues to handle a very large volume of transactions across India. The Finance Ministry has said that the measures are designed to support the long-term sustainability of the UPI ecosystem while keeping person-to-person payments free and protecting individuals and small merchants from additional charges.
For users, the most important takeaway is that UPI payments up to ₹2,000 remain within the no-charge framework, while person-to-person UPI transactions continue to be free regardless of the amount.