UPI Shop Payments Above ₹2,000: Do You Pay 0.4%?
Sending money to another person on UPI stays free at any amount. Shop payments up to ₹2,000 are free too. A 0.4% merchant-side charge hits only bigger payments, and banks are told shops must not pass it on to you.
Anyone who sends money or pays shops through UPI, plus small merchants and street vendors who receive UPI payments through QR codes.
Your UPI payments to shops are mostly untouched by the new merchant charge.
Key Takeaways
Check your UPI app for any extra fee or hidden charge on payments; apps are expressly barred from adding them.
Ask your bank to step in if a shop tries to add the merchant charge to your bill; banks have been advised to prevent this.
Treat your bank's daily UPI limit of ₹1 lakh to ₹5 lakh as a safety cap, not a fee threshold.
Example: 0.4% on ₹10,000
- Amount
- ₹10,000
- merchant-side fee on a ₹10,000 shop payment
- ₹40
Illustrative amount.
Sending money to another person on UPI stays free at any amount. Shop payments up to ₹2,000 are free too. A 0.4% merchant-side charge hits only bigger payments, and banks are told shops must not pass it on to you.
Here's what happened: Person-to-person UPI stays free at any amount, and about 70% of total UPI transaction value sits outside the merchant-fee system. A 0.4% merchant fee applies only to shop payments above ₹2,000, capped at ₹300 for payments of ₹75,000 and above. Flat ₹5 applies above ₹2,000 for railways, telecom, insurance, fuel and farm inputs; mutual fund and stock payments carry 0.02%, capped at ₹300.
What you should do: Check your UPI app for any extra fee or hidden charge on payments; apps are expressly barred from adding them. Ask your bank to step in if a shop tries to add the merchant charge to your bill; banks have been advised to prevent this. Treat your bank's daily UPI limit of ₹1 lakh to ₹5 lakh as a safety cap, not a fee threshold.
Pro tip: The merchant fee (MDR) is paid within the payments system, not collected by the Government or NPCI, and it is not meant for you to pay.
Written by GoCredit from the official Press Information Bureau, Government of India document cited below. Every figure is checked against that document. This is general information, not legal or financial advice.
For readers weighing their credit and loan options, our personal loan guide and CIBIL score resources put this update in context.
Questions people ask
Is UPI still free for sending money to friends and family?
Yes. Person-to-person UPI stays free whatever the amount. Individuals cannot be charged any fee for sending or receiving money, and there are no monthly quotas or tiered caps on free usage.
Will I pay extra when paying a shop through UPI?
No. The 0.4% merchant fee (MDR) is a cost within the merchant payment system, not a charge on customers. Banks have been advised to ensure shops do not pass it on to you.
Which UPI payments attract the merchant fee?
Only specified shop payments above ₹2,000. The rate is 0.4% (capped at ₹300 from ₹75,000), a flat ₹5 for essential sectors, and 0.02% for mutual fund and stock payments. About 4% of merchant transactions are covered.
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- [1]“UPI Continues to Remain Free for Peer to Peer Transactions and 96% of Merchant Transactions” Press Information Bureau, Government of India · 20 Oct 2026
Official source. GoCredit wrote this explainer from the document above, and every figure in it is checked against that document automatically. The worked example is calculated by GoCredit. How we write news
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