Allahabad High Court: UPI Payments MDR Exemption Clarification India

• The Indian government has clarified that UPI transactions will remain free for consumers and person-to-person transactions.
• A future Merchant Discount Rate (MDR) will be limited, threshold-based, and applicable only to certain merchant transactions.
• The clarification provides clarity on the implications of the proposed amendments to the PSS Act and is crucial for lawyers advising clients on merchant transaction fees and compliance with Indian payment regulations.

UPI transactions will continue to be free for consumers and person-to-person transactions.

The Indian government has issued a clarification regarding the proposed amendment to the Payment and Settlement Systems Act, 2007, through the Taxation and Other Laws (Amendment) Bill, 2026. The clarification states that Unified Payments Interface (UPI) transactions will continue to be free for consumers and person-to-person transactions. This means that users can still send and receive money without incurring any charges. However, if a Merchant Discount Rate (MDR) is introduced in the future, it will be limited, threshold-based, and applicable only to certain merchant transactions.

The clarification is significant as it provides clarity on the implications of the proposed amendments to the PSS Act. The proposed amendments had sparked concerns among merchants and consumers about potential charges on UPI transactions. However, the government's clarification has put to rest these concerns, at least for now. It remains to be seen how the introduction of a threshold-based MDR will impact merchant transaction fees and compliance with emerging payment regulations in India.

The clarification is crucial for lawyers advising clients on merchant transaction fees and compliance with Indian payment regulations. With the government's assurance that UPI transactions will remain free, merchants can breathe a sigh of relief. However, the introduction of a threshold-based MDR in the future may require merchants to reassess their business models and compliance strategies. Lawyers must stay vigilant and monitor developments in this space to provide effective advice to their clients.

Lawyers should watch for the implications of this clarification on their clients' merchant transaction fees and compliance with emerging payment regulations in India.

Source: Original reporting via SCC Times