UPI Charges From October 15: Supreme Court Refuses Stay on 0.4% MDR — Will Users Have to Pay?
India’s new UPI payment framework is set to move ahead for now after the Supreme Court declined to grant an interim stay on the introduction of a 0.4% Merchant Discount Rate (MDR) on specified merchant payments above ₹2,000.
On September 28, 2026, the Supreme Court issued notices to the Centre, Reserve Bank of India (RBI), National Payments Corporation of India (NPCI) and other respondents while hearing a petition challenging the new framework.
The court asked the respondents to submit their counter-affidavits within four weeks but did not stop the new system from taking effect.
As things currently stand, the revised UPI MDR framework is scheduled to become effective from October 15, 2026.
For ordinary UPI users, however, one point is particularly important:
Person-to-person UPI transfers will remain free, regardless of the amount transferred.
The new MDR applies to specified person-to-merchant (P2M) payments rather than ordinary transfers between individuals. The government also says customers themselves will not pay the MDR.
What Did the Supreme Court Decide on September 28?
The Supreme Court was hearing a public interest litigation challenging the government’s decision to introduce MDR on certain UPI merchant transactions.
A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V Mohana declined to provide interim relief stopping the framework.
Instead, the court sought responses from the Centre, RBI and other respondents within four weeks.
The court described the matter during the hearing as involving significant technical questions and asked the government to explain the basis of the framework.
Importantly, refusing an interim stay does not amount to a final ruling on whether the challenged framework is legally valid.
The petition remains before the court.
Will UPI Users Be Charged From October 15?
For regular consumers, UPI payments are not becoming generally chargeable.
The Finance Ministry has explicitly stated that consumers making UPI payments will not face a transaction charge under the new framework.
Person-to-person transactions will remain free irrespective of their value.
This means transferring ₹500, ₹5,000 or even a larger amount from your personal UPI account to another individual’s UPI account does not attract the new MDR merely because the amount exceeds ₹2,000.
The distinction is between:
P2P: Person-to-person payments.
P2M: Person-to-merchant payments.
The MDR applies only to specified merchant transactions covered by the new framework.
What Changes for Merchant UPI Payments Above ₹2,000?
Under the framework announced by the government, a nominal 0.4% MDR applies to specified person-to-merchant UPI transactions above ₹2,000.
For transactions worth ₹75,000 or more, the MDR is capped at ₹300 per transaction.
Here is what 0.4% would mathematically represent before considering exemptions or special categories:
| Merchant payment | 0.4% MDR |
|---|---|
| ₹2,000 | Not covered by general >₹2,000 rate |
| ₹2,500 | ₹10 |
| ₹5,000 | ₹20 |
| ₹10,000 | ₹40 |
| ₹25,000 | ₹100 |
| ₹50,000 | ₹200 |
| ₹75,000 | ₹300 |
| Above ₹75,000 | Capped at ₹300 under general rate |
This is MDR within the merchant payment ecosystem, not a ₹10 or ₹20 fee that the government says should simply be added to the customer’s bill.
Who Actually Pays the MDR?
This is where much of the confusion around UPI charges 2026 has originated.
The government describes MDR as a charge within the merchant-payment ecosystem. It is distributed among participants such as banks, payment service providers and UPI application providers to support the payment infrastructure.
The Finance Ministry has explicitly stated:
Customers will not pay MDR.
Banks have also been advised to ensure merchants do not pass the MDR on to customers, while UPI app providers are not supposed to impose platform fees or hidden charges on users under this framework.
Therefore, headlines saying simply “UPI payments above ₹2,000 will cost users 0.4%” can be misleading.
The actual rules are more specific.
Are UPI Payments Up to ₹2,000 Still Free?
Yes.
Merchant payments of up to ₹2,000 remain outside the new general MDR charge.
The government says person-to-person payments remain completely free, while merchant payments up to ₹2,000 and transactions covered by the zero-MDR framework for small merchants also remain free.
According to the government, approximately 96% of person-to-merchant transactions are expected to remain unaffected by the MDR framework. The Centre repeated the 96% figure before the Supreme Court during Monday’s hearing.
What About Petrol, Railways and Insurance Payments?
Not every merchant category will face the general 0.4% structure.
The government has created a special rate for certain essential or thin-margin sectors.
Transactions above ₹2,000 involving sectors including railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat MDR of ₹5 per transaction under the announced framework.
This means the MDR structure depends not only on transaction value but also on the category of merchant receiving the payment.
What About Mutual Funds and Stock Market Payments?
Capital-market transactions have another rate.
UPI payments relating to mutual funds, securities, stockbrokers and dealers are set to attract an MDR of 0.02%, capped at ₹300 per transaction.
Again, this differs from the general 0.4% rate for covered merchant payments.
Consumers should therefore avoid assuming that every UPI transaction above ₹2,000 follows exactly the same charging structure.
Why Is the New UPI MDR Being Challenged?
The petition before the Supreme Court challenges the legal and policy basis of the new framework.
The PIL was filed by advocate Anjan Datta and challenges the government’s decision relating to MDR on specified merchant UPI transactions.
Among the concerns raised in reporting on the petition is whether merchants could ultimately respond to the additional payment-processing cost by discouraging UPI payments or attempting to pass costs on to consumers.
The government, on the other hand, argues that the MDR is intended to support the long-term sustainability of the UPI ecosystem while protecting consumers and smaller transactions.
These competing arguments remain before the court; the Supreme Court has not yet issued a final determination on the challenge.
Why Did the Government Introduce MDR?
India’s UPI network requires infrastructure operated by banks, payment service providers, app companies and other participants.
The government’s stated position is that the new framework is designed to support the operation and continued expansion of this ecosystem.
The Finance Ministry says the MDR is not a tax collected by the government or NPCI. Instead, it is distributed among participants in the payment ecosystem.
The government has also sought to limit the impact by retaining free P2P transactions, protecting smaller merchant payments and introducing reduced rates for specified sectors.
Is Google Pay, PhonePe or Paytm Going to Charge Users?
The October 15 MDR framework itself does not mean a customer should automatically see a new 0.4% charge simply because they use a particular UPI app.
The government’s official clarification says consumers will not pay MDR, while UPI application providers are part of the ecosystem among which MDR revenue can be distributed.
This distinction is particularly important because MDR is often confused with a consumer transaction fee.
They are not the same thing under the announced framework.
Users should nevertheless rely on official notifications and their payment provider’s current terms if any separate service or product carries its own fee.
Does the Supreme Court Decision Mean the 0.4% MDR Is Final?
No.
The Supreme Court’s September 28 decision was about whether the framework should be temporarily stopped while the challenge is being heard.
The court declined to grant that interim stay.
It has simultaneously sought responses from the Centre, RBI and others and given the respondents four weeks to file their counter-affidavits.
Therefore, two things can be true at the same time:
The framework can currently remain scheduled to take effect on October 15, while its legal challenge continues before the Supreme Court.
Future court orders or government decisions could still affect the situation.
What Happens on October 15?
Unless the framework is changed before then, the revised MDR structure is scheduled to take effect on October 15, 2026.
For most ordinary consumers, daily UPI usage should look largely familiar.
Person-to-person transfers remain free.
Merchant payments up to ₹2,000 remain outside the general 0.4% MDR.
Specified merchant transactions above ₹2,000 can attract MDR, while some essential sectors and capital-market payments have separate rates.
The most important thing for users is therefore to distinguish between a merchant processing charge and a consumer UPI transaction fee.
They are not interchangeable terms.
What Happens Next in the Supreme Court?
The Centre, RBI and other respondents have been directed to submit their counter-affidavits within four weeks.
The case can then proceed as the court considers the arguments and technical details surrounding the framework.
Until a subsequent order changes the position, the September 28 hearing has not stopped the October 15 implementation.
For UPI users, the clearest takeaway remains that ordinary person-to-person transfers continue to be free, while the new MDR is targeted at specified merchant transactions.
That distinction will become increasingly important as October 15 approaches and more users search for information about whether UPI itself is becoming a paid service.