India considers introducing fees on UPI payments as digital ecosystem expands

India’s rapidly growing digital payments market faces a potential policy shift with the bill permitting fees on certain electronic transactions, raising questions over the future of free UPI payments amid rising infrastructure costs.

India’s fast-moving digital payments market could be heading for a major policy shift after the lower house passed a bill that opens the door to fees on some electronic transactions, including UPI. The move has raised fresh questions over whether the country’s most widely used payments rail may one day lose its zero-cost status for all users, although no such charge has been announced yet.

For now, everyday UPI payments remain free, and the government has not issued any notification setting out when, where or how a fee might apply. Industry commentary suggests any revival of the merchant discount rate, or MDR, would most likely be limited to large businesses and higher-value transactions, leaving small shops, street vendors and person-to-person transfers untouched.

The wider debate comes as India’s digital payments ecosystem continues to expand at pace, creating a rising bill for infrastructure, cybersecurity and transaction processing. At the same time, the National Payments Corporation of India has already moved to cut fees on RuPay credit card payments made through UPI from April 1, 2026, a change that could affect third-party apps and payment providers such as Paytm, PhonePe and MobiKwik.

There is also no tax on UPI itself. The Finance Ministry clarified in April 2025 that goods and services tax does not apply to UPI payments, regardless of value, with GST relevant only to associated charges such as processing fees or the underlying purchase. That means the current debate is not about tax, but about whether the government may eventually allow fees to help fund a payment system that has become central to daily life.