UPI Charges From 15 October: Who Pays the 0.4%, Who Is Exempt, and What It Costs on a ₹50,000 Broker Transfer

On 14 September the National Payments Corporation of India ended the longest free lunch in Indian payments. Since 1 January 2020, when the government zeroed the Merchant Discount Rate on UPI and RuPay debit cards by law, no business in the country has paid a paisa to accept a UPI payment. From 15 October, some of them will.

The coverage since has been loud and mostly wrong in the same direction: "UPI will now be charged." It will not be charged to you. We have read the NPCI FAQ line by line and this post is what it actually says — plus the parts it does not say, which are the interesting ones.

The one-line answer for whoever you are

If you only needed one row, you are done. The rest of this is for people who want to know why the number is 0.4%, why the threshold is ₹2,000, where the money goes, and what happens next.

The full rate card

Two things to notice. First, the 0.4% applies to the *whole* amount once you cross ₹2,000, not to the excess. A ₹2,001 payment costs the merchant ₹8.00, a ₹2,000 payment costs ₹0. That is a cliff, and cliffs get gamed — more on that below. Second, the cap of ₹300 means a ₹75,000 payment and a ₹5 lakh payment cost the merchant the same. The fee is regressive by design; it is meant to be a nuisance to nobody and a revenue line for the network.

What it costs, in rupees

And for the transactions our readers actually make — moving money into a trading account or a mutual fund — the concessional 0.02%:

Ten rupees on a fifty-thousand-rupee transfer. For context, most brokers already charge ₹9 to ₹11 for a net-banking fund transfer and nothing for UPI. Some will now start charging for UPI too — not because 0.02% hurts, but because the free-versus-paid distinction that made UPI the default has narrowed. Watch your broker's fund-transfer page in November.

Why now, and why 0.4%

The honest answer is that free was never free. Someone has to run the switch, the fraud systems, the bank integrations and the 24-hour ops for 791 million transactions a day, and for six years that someone has been paid mostly by the government's incentive scheme — ₹1,500 crore approved for FY2024-25 for low-value UPI and RuPay debit transactions — and by payment companies burning capital in the hope of a business model arriving later. It has now arrived.

NPCI says the proceeds go to technology upgrades, fraud prevention and cybersecurity, with the details of a dedicated small-merchant fund to follow within three months. The Department of Financial Services has framed it as giving smaller UPI apps a revenue line so the market is not permanently a two-horse race between PhonePe and Google Pay. Both of those are reasonable things to want. Neither required the specific number 0.4%; that was a negotiation between banks, NPCI and the government, and the merchant was not in the room.

The row about America

You will have seen the headlines. The Congress party, through Rahul Gandhi, alleged the MDR was introduced under pressure from the United States, pointing to the 2026 USTR report on trade barriers. The Department of Financial Services called that "patently false and misleading". Congress MPs on the Standing Committee on Finance say no concrete MDR proposal was ever put before them; the government says the committee's recommendations support it.

What the USTR report actually complains about is narrower than the headline: that US card networks cannot participate in credit-on-UPI, which is RuPay-only, and that NPCI's 30% market-share cap on third-party apps constrains foreign-owned players. A merchant fee does not address either of those. If anything, a revenue line for domestic apps makes the 30% cap easier to keep. We do not know what was said in which meeting, and neither does anyone writing about it. What we can say is that the merchant fee is consistent with a purely domestic motive — the industry has asked for it in public every year since 2020 — and that the timing, a week before the rules land, is a political fact, not an economic one.

The ₹2,000 cliff and what it will do to your bills

Here is our prediction, and you can hold us to it in December. Within a quarter, any merchant paying the standard rate will have learned that a ₹3,000 bill split into ₹1,500 and ₹1,500 costs ₹0 instead of ₹12. Restaurants will offer to split. Electronics shops will bill the phone and the case separately. Wedding photographers will send three QR codes. None of this is illegal, all of it is inevitable, and the wallet-on-UPI interchange — which has had the same ₹2,000 line since 2023 — has already trained the trade in exactly this behaviour.

NPCI can respond in two ways: move the threshold, or start counting per-customer-per-day instead of per-transaction. The second is technically easy and would be the end of the split trick. We would expect it inside a year if the first three months of data show what we think they will show.

The other behaviour to watch is banks nudging you from bank-account UPI to RuPay-credit-on-UPI, which is outside this framework. A credit card on UPI earns the bank interchange that a bank-account UPI payment does not. You will see more "pay with credit, earn 1%" prompts, and you should treat them exactly as you would any other credit card offer: fine if you clear it, expensive if you do not.

What it costs us

We sell prepaid passes to this site. The 12-month ones are ₹2,999 and ₹4,999, both above the threshold. When a customer pays for one of those by UPI through a domestic gateway, we will owe ₹12 and ₹20 respectively. We will absorb it, partly because the rule says we must and partly because it is a rounding error: the international merchant-of-record we currently route through keeps roughly a quarter of every rupee once its fees and tax handling are counted. A domestic gateway at 0.4% plus its own margin is still the cheaper option by a mile. If 0.4% changes anyone's pricing, it was not the 0.4%.

That is roughly the position of every software business, every e-commerce store above the small-merchant line and every restaurant chain in the country. The fee is real, it is small, and it is smaller than what they already pay on every card. The people for whom it is not small are the ones in between — a single-outlet shop doing ₹3 lakh a month with an average bill of ₹2,500 — and they are the ones who will learn to split.

Four things that are not settled yet

Read next

The other money-mechanics posts people find useful: how to pay tax on F&O and intraday income, how much money you actually need to start trading, and direct vs regular mutual funds — why 1% matters more than you think. We will update this page when NPCI publishes the interchange split and the small-merchant fund details.