The Indian government has clarified that UPI remains free for person-to-person transactions, easing concerns over potential fees amid discussions on funding digital payments expansion.
The Finance Ministry has again moved to calm fears that Unified Payments Interface users will soon be charged for everyday digital payments, saying there is no proposal to impose transaction fees on person-to-person transfers. According to the ministry, UPI will remain free for consumers, while any future merchant discount rate, or MDR, would be limited, modest and applied only to a narrow set of merchant transactions above a threshold.
The clarification comes after weeks of speculation over whether the government was preparing to allow banks and payment firms to recover costs from UPI usage. The ministry has now underlined that such rumours are unfounded and that all person-to-person payments will continue without charge. It has also rejected claims that Goods and Services Tax could be levied on UPI transactions above ₹2,000, saying there is no MDR on UPI at present and therefore no GST liability on those payments.
At the centre of the debate is the question of how India’s digital payments system should be funded as it expands further. UPI has become the country’s dominant retail payment rail, and officials have argued that keeping it affordable is essential to its growth, especially as it reaches smaller towns and rural areas. The government has also signalled that if MDR is ever introduced, it would be far below the rates typically charged on debit and credit card payments.
The issue surfaced more sharply after Parliament passed the Taxation and Other Laws (Amendment) Bill, 2026, which opens the door to changes in the legal framework governing electronic payments. Industry watchers say the key unresolved question is whether any merchant charges would apply only to larger businesses, with some pointing to the turnover threshold under tax law, while others believe the trigger could be much lower. Even so, the government’s public line remains unchanged: UPI for consumers will stay free, and any future cost recovery will be carefully limited.
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