What is actually decided, and what is not
Only two things in this story rest on documents anyone can open. The first is NPCI's press release dated Mumbai, 13 October 2026. Its operative sentence reads: "UPI and Services Steering Committee today decided that, keeping in mind the festive season, Merchant Discount Rate (MDR) on select Person-to-Merchant (P2M) UPI transactions, shall be implemented immediately post Diwali at a date to be notified separately."[1] It contains no rate, no threshold and no date. I opened it through a text mirror because the NPCI site refused a direct download.
The second is a disclosure that One 97 Communications (Paytm) filed with BSE and NSE on 15 September 2026. It says NPCI, through circular no. NPCI/UPI/OC-No.237/2026-27 dated 15 September 2026, "introduced a Merchant Discount Rate of upto 0.4% on UPI Person-to-Merchant (P2M) transactions exceeding ₹2,000", that the circular "shall be effective from October 15, 2026", and that "no charge is levied on customers for UPI payments, which shall continue to remain free of charge for them."[2] The 15 October date has since been overtaken by the deferral. I could not open the circular itself, so everything beyond the Paytm filing's description is second-hand.
That second-hand layer is large. Law-and-business outlets summarised an NPCI FAQ and a government notification, and their summaries are where the ₹300 cap and the ₹1 lakh exemption come from. They are plausible and they agree with each other on most points, but a summary of a FAQ is not the FAQ. The table keeps the source visible for every line.
How the timeline reads
The sequence matters because search results still show the old date. Anyone who read "from 15 October" in mid-September is now out of date.
- 14 September 2026: a Department of Financial Services notification is reported, covering charges on UPI and RuPay debit card payments up to ₹2,000.[5]
- 15 September 2026: NPCI circular OC-No.237/2026-27, effective 15 October according to Paytm's filing; NPCI FAQs follow, as summarised by SCC Online.[2][3]
- 13 October 2026: NPCI defers the start to immediately after Diwali, date to be notified separately.[1]
- 19 October 2026: no new date is notified.
- 8 November 2026: Diwali Laxmi Pujan; NSE also lists 10 November as a trading holiday for Diwali Bali Pratipada.[6]
"Immediately post Diwali" does not map to a single calendar day. Diwali is a multi-day festival, so the first working day after the last festival holiday, the first of the next month, or a mid-month date are all consistent with the wording. Plan for the earliest case: assume the charge could apply within days of 10 November and make your preparations in October.
The government notification covers payments up to ₹2,000
The reported section 10A notification is the part to treat most carefully. LiveLaw's headline says the Centre prohibits charges on UPI transactions up to ₹2,000 and on RuPay debit cards.[5] That is consistent with the NPCI framework leaving payments up to ₹2,000 free. Only LiveLaw reports the notification, and it covers charges up to ₹2,000; no source cited here says what it means for payments above ₹2,000, and I have not read the gazette text. So this guide does not say that MDR above ₹2,000 is legally settled in any direction. The only fact that is safe to build on is the NPCI circular as described in Paytm's filing, plus NPCI's own statement that the start is deferred.
Step 1: sort your receipts into P2P, P2M by QR and P2M by gateway
MDR, as described in every source above, sits on person-to-merchant payments. Whether you owe anything therefore depends on how the money reached you, not on what you sell.
The three buckets
P2P receipts. A friend or relative sends you money to your personal UPI ID. Reported as exempt whatever the amount.[3] This bucket does not become business income just because you also freelance; it simply is not the target of the rule.
P2M by QR or merchant VPA. A customer scans a merchant QR registered to your shop or business, or pays to a merchant handle. This is where the reported ₹1 lakh a month exemption for small P2PM merchants applies, if it stands.[4]
P2M through a payment gateway or aggregator. Your website checkout, payment link or invoice link opens UPI inside Razorpay, Cashfree, PhonePe PG, PayU or similar. Your contract is with the gateway, not directly with a bank, so the question of who bears NPCI's MDR is a matter of your agreement with them.
A five-minute audit
Export three months of settlement or bank statements and tag each credit. A spreadsheet with four columns is enough: date, amount, bucket, and payer type (individual or business). Then total the P2M QR column per calendar month. The result tells you two things: whether you sit near the reported ₹1 lakh threshold, and how many payments land above ₹2,000.
If you take client payments to a personal handle because it is convenient, flag it. Collecting business payments on a personal VPA is a question about your bank's terms and about clean bookkeeping, and I am not offering an interpretation of how the MDR framework would treat it. Ask your bank. Separately, keeping business and personal money apart is what the freelancer accounting guide recommends for GST and ITR reasons that have nothing to do with MDR.
Step 2: do you count as a small P2PM merchant?
As reported, NPCI's FAQ defines the small-merchant tier as vendors who receive up to ₹1 lakh a month through UPI QR codes directly into their accounts, with GST registration not required to qualify[3], and with the exemption holding even when a single payment is above ₹2,000.[4] SCC Online adds a qualifier: MDR applicability depends on the merchant's overall categorisation and monthly collections.[3]
Practical reading, flagged as unconfirmed: a tea stall, tutor or home baker taking ₹300 to ₹1,500 per sale on a QR will probably never see a charge. A freelancer who gets a handful of ₹25,000 payments, or a shop with a busy month above ₹1 lakh in QR collections, is the person the rule can reach. What is not known is how the monthly total is measured (calendar month, which accounts, whether gateway settlements count) and what happens in a month you cross the line. Those are details for the final circular.
Worked examples (illustrative only)
The arithmetic below applies the reported structure to round numbers. None of it is a quote of a notified rate card. The reported cap of ₹300 is applied to payments of ₹75,000 and above, which is where 0.4% reaches ₹300.
Two things stand out. The ₹3,000, ₹50,000 and ₹75,000 and above rows match the NPCI FAQ examples as SCC Online reproduced them (₹12, ₹200 and ₹300).[3] And the percentage drops as tickets grow: ₹300 on ₹1,00,000 is 0.3%, and ₹300 on ₹3,00,000 is 0.1%.
Three business scenarios
The freelance designer. Ten client payments of ₹25,000 in a month, ₹2,50,000 in total. At 0.4% each costs ₹100, so ₹1,000 across the month. If those payments arrive as P2M on a merchant QR and the account is not in the small-merchant tier, that is the exposure. If the same ten payments are bank transfers, the exposure is zero.
The online seller. A store taking 200 orders a month at ₹1,500 pays nothing, because every order is at or below ₹2,000. The same store selling 40 orders at ₹3,000 (₹1,20,000 in total) would pay 40 x ₹12 = ₹480, about 0.4% of revenue, if its UPI payments count as standard P2M. The reported ₹1 lakh a month small-merchant tier is described for UPI QR collections, so it may not apply to gateway checkout at all.
The shop with a counter QR. Most baskets are below ₹2,000, which NPCI says covers over 95% of merchant UPI volume (reported by SCC Online and Outlook India).[3] The risk is concentrated in a few large baskets: an electronics shop with ten ₹20,000 sales pays up to ₹80 each, ₹800 total. To run your own numbers, multiply each payment above ₹2,000 by 0.004 and cap the result at ₹300 if the reported cap holds. To compare card and international gateway fees, the payment fee calculator covers those providers.
The gateway angle
If you sell through a checkout page or send payment links, you are probably not paying NPCI directly. Your gateway collects from the customer's bank and settles to you. Whether and how a gateway passes a new MDR on to you is set by its agreement and pricing page. I did not verify any gateway's current UPI pricing in preparing this guide, and gateway fees change, so I am not quoting numbers. What to look for in your agreement:
- Does the plan list a UPI rate today, or does it say "0% on UPI" for a promotional period that may end?
- Is there a clause allowing the gateway to pass on "regulatory or network charges"?
- Is there notice period before a pricing change, and do you have to accept it to keep processing?
- Does the fee apply to the gross amount or the net after GST?
- Do refunds return the fee?
The last question is not trivial. If a ₹5,000 payment is refunded, whether the ₹20 comes back depends on the processor. Ask support in writing and keep the answer.
If you receive payments through a link rather than a gateway, the UPI payment link maker generates a link and QR for a given amount and note. Ask your bank whether it classifies your VPA as personal or merchant.
What about GST on the fee?
MDR is a charge for a service. Check whether your gateway or bank invoice shows GST on its fees today. I did not open a CBIC notification for the treatment of MDR on UPI specifically, so I am not stating a rate or a rule. Check the GST line on your gateway or bank statement for the current treatment, and use the GST calculator to split an invoice into base and tax once you know what applies to you. If you claim input tax credit on payment-processing fees, your accountant will want fee invoices rather than bank narrations.
Pricing and passing the cost on
Reported rule: merchants cannot recover MDR from customers, and UPI apps cannot add platform fees.[3][4] So a "UPI surcharge" line on an invoice is exactly what the reports say is not permitted. If the fee matters to your margin, the clean way to recover it is a base-price change, not a visible add-on. At 0.4% the fee is small for most sellers: a 5% margin product gives up 8% of its margin on a payment above ₹2,000 (0.4 divided by 5). A 40% margin service barely notices.
There is also a payment-mix option. For large invoices to businesses, bank transfer (NEFT, RTGS or IMPS) avoids the UPI path entirely. Whether bank-transfer fees are lower for your amounts depends on your bank; look at your fee schedule rather than assuming. UPI is popular with customers for convenience, and pushing large payments elsewhere can cost you sales.
What is still unknown
- The effective date. NPCI says "at a date to be notified separately."[1]
- Whether the final rate remains "up to 0.4%", and who sets the rate within "up to" when a gateway or bank is in the chain.
- Whether the ₹300 cap, the ₹5 flat fee categories and the 0.02% capital-markets rate survive unchanged into the notified rate card.
- Whether the small-merchant ₹1 lakh a month tier is unchanged, and how monthly collections are counted.
- How the government notification reported by LiveLaw interacts with MDR on payments above ₹2,000.
- What the "select" in "select P2M transactions" covers beyond the categories already described.
Checklist before the date is notified
- Export the last three months of UPI credits and tag each as P2P, P2M QR, or P2M gateway.
- Total the P2M QR receipts per month and compare with ₹1 lakh.
- Count the payments above ₹2,000 and multiply by 0.4% to get a worst-case monthly fee; apply the ₹300 cap to any payment of ₹75,000 and above.
- Read your gateway pricing page and agreement for UPI fees, pass-through clauses and notice periods.
- Decide a payment mix for invoices over, say, ₹50,000: UPI, bank transfer or both.
- Ask your bank how it classifies your VPA and whether your QR is on the small-merchant tier.
- Set a reminder to check NPCI's website for the notified date, and re-read this post's status line before acting.
If you want a companion read on a different UPI change affecting merchants and freelancers this autumn, the UPI privacy rules guide covers masked mobile numbers and username-based UPI IDs.
Frequently asked questions
Is UPI MDR cancelled?
No. NPCI's 13 October 2026 release says MDR on select P2M UPI transactions "shall be implemented immediately post Diwali at a date to be notified separately." It is postponed, with no new date as of 19 October 2026.[1]
Will customers be charged for UPI payments above ₹2,000?
According to the Paytm filing quoting NPCI's circular, no. The charge is on the merchant side and UPI stays free for customers.[2]
Does the 0.4% apply to money from friends and family?
The sources describe MDR as applying to P2M, not P2P. SCC Online reports P2P transfers as exempt regardless of amount.[3]
I get under ₹1 lakh a month by QR. Do I pay?
Reported as exempt if you fall in the small-merchant P2PM tier, even for single payments above ₹2,000.[4] That detail comes from news summaries of the NPCI FAQ and should be confirmed once the notified framework is published.
Can I add a UPI surcharge to my invoices?
Outlets report that merchants cannot pass MDR on to customers.[3] Treat a visible surcharge as risky and adjust base prices instead if you need to recover cost.
When should I expect the new date?
Nobody has published one. Diwali Laxmi Pujan falls on 8 November 2026,[6] and NPCI's wording points to the period straight after the festival, but treat any specific date you see in a social post as unverified until it appears on NPCI's website.
Sources
- NPCI press release: UPI MDR on Select Merchant Transactions Shall be Implemented Post Diwali, Mumbai, 13 October 2026
- One 97 Communications Ltd (Paytm), Regulation 30 disclosure to BSE and NSE, 15 September 2026, citing NPCI circular NPCI/UPI/OC-No.237/2026-27
- SCC Online: UPI MDR explained, 16 September 2026 (summary of NPCI FAQ; secondary source)
- Outlook India: UPI payments above ₹2,000, what changes from October 15, 15 September 2026 (secondary source)
- LiveLaw: Centre prohibits charges on UPI transactions up to Rs 2,000 and RuPay debit card, 15 September 2026 (secondary source; notification text not read)
- NSE: trading holidays 2026, Diwali Laxmi Pujan 8 November 2026 and Diwali Bali Pratipada 10 November 2026
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