The Centre on Saturday clarified that users will not be charged for making payments through the Unified Payments Interface (UPI), amid concerns over the recent amendment to the Payment and Settlement Systems Act (PSS Act).
The government said all Person-to-Person (P2P) UPI transactions would continue to remain free, while the vast majority of merchant transactions would also remain charge-free.
The government said any Merchant Discount Rate (MDR) introduced in the future would apply only to a limited set of merchant transactions above a specified threshold and would be levied at a nominal rate, significantly lower than the MDR generally associated with debit or credit card transactions.
The clarification comes after the amendment to the PSS Act sparked concerns that UPI users could eventually be charged for everyday transactions.
The government said the amendment is only an enabling provision intended to support the long-term sustainability of UPI, technological advancement, financial inclusion and resilience against emerging cybersecurity and other digital risks.
The Taxation and Other Laws (Amendment) Bill, 2026, proposes an amendment to Section 10A of the Payment and Settlement Systems Act, 2007. Once Parliament passes the Bill, the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), will decide on the MDR, if any.
No blanket MDR on UPI transactions
The government stressed that any future MDR would not be imposed across the UPI ecosystem. Instead, it would be threshold-based and limited to specified merchant transactions.
“UPI will remain free for citizens,” the government reiterated, adding that there would be no charges on everyday transactions made by consumers.
The government said the framework was aimed at ensuring that UPI remains affordable and accessible while creating a sustainable financial model for the next phase of its expansion.
Focus on sustainability and cybersecurity
Explaining the need for the amendment, the government said UPI has witnessed exponential growth in transaction volumes, requiring continuous investment in infrastructure, cybersecurity and fraud prevention.
It also said greater competition in the digital payments market would require more companies to expand their operations and invest in the ecosystem. A sustainable revenue model, it argued, would help support this expansion without relying entirely on government subsidies.
“Reliance on subsidies alone is not viable for the next wave of growth,” the government said, stressing the need for a balanced framework to keep UPI robust, inclusive and future-ready.
The government said the proposed framework would help strengthen UPI against emerging risks while enabling technological upgrades and expansion into rural and semi-urban areas.
Government rejects claims of external pressure
The Centre also rejected media reports suggesting that external influences had driven the policy change, describing such claims as “unfounded, completely false and misleading”.
It pointed out that the government had introduced UPI in 2016 and had ensured that it remained free for citizens and merchants since January 2020.
The government said UPI had subsequently evolved into the world’s largest real-time interoperable payment system and remained an Indian innovation that had expanded beyond the country’s borders.
UPI processes Rs 29.9 lakh crore in July
The government highlighted the rapid expansion of UPI since its launch in 2016-17.
UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone, making it the world’s largest real-time payment system, according to the government.
The payment platform is currently operational in 11 foreign countries, while several other countries have expressed interest in adopting or integrating UPI-based systems.
The government said UPI had transformed India’s digital economy by providing an interoperable, real-time payment infrastructure that has reached millions of users and businesses.
It described UPI as a “national achievement built by Indians, for Indians” and said the government would continue to support its development and expansion.
The Centre urged citizens to rely on official information issued by the Ministry of Finance, the Reserve Bank of India and NPCI and avoid forwarding unverified messages regarding possible UPI charges.
The government reiterated that UPI would continue to remain free for citizens, while any future MDR would be nominal and restricted to a limited category of merchant transactions.
