UPI payments are set to see an important change from October 15, 2026, with a Merchant Discount Rate (MDR) applying to certain Person-to-Merchant transactions above ₹2,000.

Under the revised framework reported by the National Payments Corporation of India (NPCI), eligible UPI merchant transactions exceeding ₹2,000 will attract an MDR of 0.40%. However, the charge will be capped at ₹300 per transaction, meaning the fee will stop increasing once the applicable transaction amount reaches the cap threshold.

The most important point for ordinary UPI users is that this MDR is a charge on the merchant side. Customers are not supposed to pay an additional MDR simply for making the eligible UPI payment. Person-to-person UPI transfers will also continue to remain free.

So, how much MDR will apply to payments of ₹3,000, ₹50,000, ₹75,000 or ₹1 lakh? Here is the calculation.

UPI MDR Calculation

The calculation is straightforward until the MDR reaches its ₹300 ceiling. For example, 0.40% of ₹50,000 works out to ₹200, while 0.40% of ₹75,000 is exactly ₹300.

For higher eligible payments, the maximum cap becomes important.

How Much MDR Will Apply on a ₹3,000 UPI Payment?

Suppose a customer purchases goods or services worth ₹3,000 from an eligible merchant and makes the payment through UPI.

The MDR calculation would be:

₹3,000 × 0.40% = ₹12

Therefore, the applicable MDR would be ₹12.

This does not mean the customer has to pay ₹3,012. Under the announced framework, MDR is charged on the merchant side rather than being an additional UPI fee imposed on the customer.

MDR on a ₹50,000 UPI Payment

The same formula can be used for a ₹50,000 eligible merchant payment:

₹50,000 × 0.40% = ₹200

The MDR would therefore be ₹200.

Since ₹200 remains below the maximum permitted MDR of ₹300, the cap does not affect this transaction.

What Happens at ₹75,000?

At ₹75,000, the calculation reaches the maximum MDR limit:

₹75,000 × 0.40% = ₹300

Therefore, the applicable MDR is ₹300.

For general eligible merchant transactions at or above this threshold, the maximum MDR cap prevents the charge from rising beyond ₹300.

Why Is MDR Only ₹300 on a ₹1 Lakh Payment?

This is where the maximum cap becomes particularly useful to understand.

Normally, 0.40% of ₹1 lakh would be:

₹1,00,000 × 0.40% = ₹400

But the MDR framework places a maximum limit of ₹300 on the applicable general merchant transaction.

Therefore, instead of ₹400, the applicable MDR would remain ₹300.

The same cap principle means that simply increasing the payment amount beyond ₹75,000 does not keep increasing MDR indefinitely for transactions covered by this general rate.

What About Payments of ₹2,000?

The 0.40% MDR applies to eligible P2M transactions above ₹2,000.

Therefore, a payment of exactly ₹2,000 does not attract this MDR under the reported framework.

This distinction is important because the new rule should not be interpreted to mean that every UPI payment will now carry a fee.

Customers Do Not Pay the MDR

For consumers, this is one of the most important aspects of the new system.

MDR stands for Merchant Discount Rate. It is a fee associated with merchants accepting digital payments rather than a direct transaction charge added to the customer's UPI payment.

NPCI's framework keeps ordinary person-to-person transfers outside the MDR. So, sending money to another individual through UPI remains different from making an eligible payment to a merchant.

Not Every Merchant Payment Follows the Same 0.40% Formula

There are also important exceptions to the general calculation.

Reports on the NPCI framework say certain categories, including railways, telecom, insurance and fuel, will attract a flat ₹5 MDR for applicable payments above ₹2,000 rather than the standard 0.40% calculation.

Capital-market transactions also have a separate MDR structure. Therefore, consumers and businesses should not assume that the ₹3,000, ₹50,000 and ₹75,000 examples above apply identically to every category of UPI merchant payment.

What Changes From October 15?

The revised MDR framework is scheduled to take effect on October 15, 2026.

For eligible general Person-to-Merchant UPI transactions above ₹2,000, the standard MDR will be 0.40%, subject to the ₹300 maximum cap.

That makes the basic calculation easy to understand: a ₹3,000 eligible payment results in ₹12 MDR, ₹50,000 results in ₹200, and ₹75,000 reaches the ₹300 ceiling. Even if the transaction increases to ₹1 lakh, the applicable MDR under the general capped structure remains ₹300 rather than ₹400.

For customers, however, UPI continues to work without an additional MDR being charged to them, while person-to-person transfers remain outside this merchant fee framework.