UPI payments will continue to remain free for consumers, PhonePe CEO Sameer Nigam said, amid renewed discussions over possible transaction charges following the passage of a tax amendment bill in the Lok
Sabha.
In a post on X, Nigam clarified that consumers will not be charged for making UPI payments and that the digital payment system will remain free for individual users.
The statement came after concerns emerged over the possibility of introducing Merchant Discount Rate (MDR) charges on certain UPI transactions, leading to questions about whether users may eventually have to pay for digital payments.
MDR Charges To Apply Only To Eligible Merchant Transactions
The Payments Council of India (PCI) also clarified that UPI payments would remain free for consumers and that small merchants would not have to pay MDR for accepting UPI transactions.
The industry body explained that merchant service charges, wherever applicable, would be part of commercial arrangements between merchants and payment service providers. Such charges would not be collected from customers using UPI.
The debate follows provisions under the Taxation and Other Laws (Amendment) Bill, 2026, which allow the government to introduce MDR on select electronic payment modes.
Reports suggest that a possible MDR of 0.25% to 0.4% could apply to certain business-related UPI transactions above ₹2,000. However, person-to-person payments would remain outside the proposed framework.
Digital Payment Ecosystem Faces Funding Debate
Merchant Discount Rate refers to the fee paid by businesses to entities involved in processing digital payment transactions. While MDR is common in several digital payment systems, UPI transactions have largely operated without direct charges for merchants.
The cost of maintaining the UPI ecosystem has so far been absorbed by banks, payment companies and other stakeholders involved in processing transactions.
The possibility of introducing MDR for selected business transactions has triggered discussions over the long-term funding model for India’s rapidly expanding digital payments network.
UPI has become one of the most widely used digital payment platforms in the country, enabling instant bank-to-bank transfers for individuals and businesses.
