UPI MDR Frequently Asked Questions

UPI MDR (Merchant Discount Rate) is a fee that may be charged on UPI merchant payment transactions. It is deducted from the merchant's settlement amount — not from the customer payment. For standard eligible P2M transactions up to ₹2,000, MDR is zero. Above ₹2,000, standard merchants may be charged 0.4% MDR, capped at ₹300 per transaction. Learn more →

MDR is borne by the merchant — not the customer. It is deducted from the merchant's settlement by the acquiring bank or payment service provider. The government has mandated zero MDR for most standard P2M transactions to promote merchant adoption. Detailed explanation →

No. Customers pay the full face value of the UPI transaction. MDR is deducted from the merchant settlement, not added to the customer payment. For example, if a customer pays ₹10,000 via UPI, the merchant receives ₹9,960 (after ₹40 MDR) — the customer is not charged an extra ₹40.

As of 18 September 2026:

• Standard P2M: Zero MDR for ≤ ₹2,000; 0.4% (max ₹300) for > ₹2,000
• Essential/thin-margin sectors: ₹5 flat for > ₹2,000
• Capital market: 0.02% (max ₹300)
• Small merchant / zero-MDR category: ₹0
• P2P transfers: ₹0

No. For standard eligible P2M (Person-to-Merchant) UPI transactions, MDR is zero for amounts up to and including ₹2,000. This threshold applies to standard merchants. See ₹2,000 calculation →

The MDR cap for standard merchants is ₹300 per transaction. This cap is reached when 0.4% of the transaction amount equals ₹300 — at ₹75,000 (0.4% × ₹75,000 = ₹300). For all amounts above ₹75,000, MDR remains fixed at ₹300. See ₹75,000 calculation →

For a standard merchant: MDR = ₹10,000 × 0.4% = ₹40. GST (18% on MDR) = ₹7.20. Total deduction = ₹47.20. Merchant receives ₹9,952.80. Full ₹10,000 breakdown →

For a standard merchant: MDR = ₹300 (capped). GST = ₹54. Total deduction = ₹354. Merchant receives ₹99,646. Without GST: merchant receives ₹99,700. Full ₹1 lakh breakdown →

Standard merchant formula: MDR = min(Transaction Amount × 0.004, ₹300) — only if amount > ₹2,000. GST = MDR × 0.18 (where applicable). Net Settlement = Transaction Amount − MDR − GST. Detailed calculation guide →

Where MDR applies, GST at 18% may be levied on the MDR amount — not on the full transaction value. For example, on ₹40 MDR: GST = ₹7.20. This reduces the net merchant settlement further. The exact treatment depends on your merchant category, acquiring bank and billing arrangements. UPI MDR and GST explained →

MDR is the payment processing fee charged by acquiring banks/PSPs. GST is a government tax levied on the MDR service. MDR goes to the payment ecosystem; GST goes to the government. Both are calculated on different bases: MDR on the transaction amount, GST on the MDR amount.

No. Person-to-Person (P2P) UPI transfers between individuals — sending money to friends, family, or personal payments — do not attract any MDR. MDR applies only to merchant payments (P2M — Person-to-Merchant).

Small merchants may qualify for zero-MDR status under the applicable government framework. Eligibility typically depends on merchant category, annual turnover, and whether they are registered as a small/micro merchant with their acquiring bank. Contact your bank or PSP to confirm your MDR status. UPI MDR for small merchants →

Merchants are generally not permitted to add a surcharge or levy extra charges on customers specifically to recover UPI MDR. The merchant discount rate is intended to be a backend charge on the merchant, not a customer-facing surcharge. Always verify current regulations with your acquiring bank and relevant authorities before considering any pricing changes.

No. P2P transfers attract zero MDR. Standard P2M transactions of ₹2,000 and below attract zero MDR. Small/zero-MDR category merchants attract zero MDR. MDR applies to standard merchant transactions above ₹2,000, essential sector transactions above ₹2,000 (₹5 flat), and capital market transactions (0.02%).