Datanomics: Only 4% of UPI transactions to merchants may draw fee

Only about 4% of UPI merchant transactions may attract an MDR under the proposed law, while all person-to-person UPI payments will remain free

One in every 25 UPI payments to businesses may attract a fee when the Taxation and Other Laws (Amendment) Bill, 2026 is implemented. This calculation is based on UPI payment data from 2025-26. This means that an overwhelming 96 per cent of the number of UPI transactions to merchants will not attract any fee, technically called the merchant discount rate (MDR). All person-to-person UPI payments would be exempt from the proposed MDR. UPI has made tremendous progress since its launch a decade ago, more in terms of the number of transactions than the value of those payments. Many fear that MDR may shift some UPI transactions to other digital payment forms, such as credit and debit cards or electronic payments. The MDR rate and any further exceptions could be notified in rules under the Act.