GUWAHATI: The government on Saturday clarified that Unified Payments Interface (UPI) users will not have to pay any transaction charges for making digital payments, amid concerns over a proposed amendment to the Payment and Settlement Systems Act, 2007.
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The Finance Ministry said Person-to-Person (P2P) UPI transactions will continue to remain free. It also clarified that if a Merchant Discount Rate (MDR) is introduced in the future, it would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate.
The clarification comes amid debate over the proposed amendment to the Payment and Settlement Systems Act, 2007, under the Taxation and Other Laws (Amendment) Bill, 2026. The ministry said the amendment has been misinterpreted by some as a move to impose charges on ordinary UPI users.
The proposed change to Section 10A of the Payment and Settlement Systems Act is an enabling provision aimed at ensuring UPI's long-term sustainability, technological advancement and resilience against emerging risks. The provision itself does not impose any charge on UPI transactions.
Once Parliament passes the Bill, the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), will decide on the MDR, if any.
The ministry said the rapid growth in UPI transaction volumes has increased the need for continuous investment in cybersecurity, fraud prevention and payment infrastructure. It also said a sustainable revenue model is necessary to encourage greater participation and competition among companies in the digital payments ecosystem.
The government said the vast majority of UPI transactions will remain free for merchants. Any MDR, if introduced, would not be levied across all merchant transactions but would be threshold-based and applicable only to a limited category at a nominal rate, lower than debit or credit card MDRs.
The Finance Ministry also rejected reports suggesting that external influences were driving the policy changes, describing such claims as “unfounded, completely false and misleading”.
UPI has transformed India's digital payments ecosystem since its launch in 2016-17. According to government data, the platform processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone.
The government has described UPI as the world's largest real-time payment system. The platform is currently live in 11 foreign countries, while several other countries have expressed interest in adopting or integrating it.
The ministry said the expansion of UPI into rural and semi-urban areas and its growing international footprint make it necessary to maintain a payment system that is secure, affordable, inclusive and financially sustainable.
The government reiterated that UPI will remain free for citizens and that there will be no charges on everyday transactions made by users. Any future MDR, if introduced, will be nominal and restricted to a limited set of merchant transactions above a specified threshold.