Fees, Price Drivers and 2026 Rules
Merchant payment processing fees in India (2026): MDR, UPI charges, devices and GST explained
What Indian merchants pay to accept cards, UPI, wallets and online payments in 2026, what drives each fee, which rules apply and how to estimate your own cost.
A merchant in India pays to accept digital payments mainly through the merchant discount rate (MDR), a percentage of each card payment kept by the banks and the card network, plus device rental, gateway or account fees and 18% GST on those fees. Some payments cost nothing by law: RuPay debit cards and UPI payments up to ₹2,000 are free to accept under section 10A of the Payment and Settlement Systems Act, 2007, as specified by the Department of Financial Services on 14 September 2026. Larger UPI payments are about to change: NPCI has announced a 0.4% MDR on select merchant UPI payments above ₹2,000 (capped at ₹300), and on 13 October 2026 deferred its start until after Diwali. Credit cards remain the most expensive common method. This guide maps every charge and links to a detailed guide on each.
The fees on a merchant's statement
| Charge | What it is | Who sets it |
|---|---|---|
| MDR on cards | Percentage of each card sale, split between issuer, network and acquirer | Your agreement; RBI caps for debit cards; zero for RuPay debit |
| UPI MDR | Charge on select P2M UPI payments above ₹2,000, once implemented | NPCI's UPI and Services Steering Committee framework |
| Wallet (PPI) interchange | Charge on wallet-funded UPI merchant payments above ₹2,000 | NPCI interchange framework, passed on through your acquirer |
| Fixed per-transaction fee | A rupee amount on top of the percentage, common with gateways | Your agreement |
| Device rental | Monthly rent for a card terminal or soundbox, often waived above a sales target | Your agreement |
| Gateway and account fees | Set-up, annual maintenance, minimum monthly fees, SMS or link fees | Your agreement |
| Settlement fees | Extra charge for same-day or instant settlement | Your agreement |
| Chargeback and refund fees | Fees for handling disputes or processing refunds | Your agreement |
| GST | 18% on fees, rentals and service charges under current rates | GST law |
The first rows are percentages of sales; the rest are fixed amounts. A small shop with low sales can find that fixed charges cost more than MDR.
How much each payment method costs
The following is a summary of the rules and the ranges that official sources mention. Rates for your business are in your offer.
| Payment method | Merchant cost in October 2026 | Source of the rule |
|---|---|---|
| RuPay debit card | No charge allowed | PSS Act s.10A, S.O. 5067(E) of 14 Sept 2026 |
| UPI up to ₹2,000 | No charge allowed | Same notification |
| UPI above ₹2,000 (P2M) | 0.4%, cap ₹300 from ₹75,000; flat ₹5 in notified categories; 0.02% capital markets. Deferred to after Diwali 2026 | DFS/NPCI FAQ of 15 Sept 2026; NPCI release of 13 Oct 2026 |
| UPI to small P2PM merchants | No MDR while UPI credits stay within ₹1 lakh a month | Same FAQ |
| Other debit cards | RBI cap: 0.40% (₹200 max) for merchants with turnover up to ₹20 lakh; 0.90% (₹1,000 max) for others; QR 0.30% / 0.80% | RBI MDR rationalisation, effective 1 Jan 2018 |
| Credit cards | Not capped; NPCI's FAQ calls 1.5% to 2.5% typical | Market pricing, your agreement |
| Wallet-funded UPI above ₹2,000 | Interchange of up to 1.1% depending on category has applied since April 2023 | NPCI PPI interchange framework |
| Credit card or credit line on UPI | Card or credit product rules, not the UPI MDR | DFS/NPCI FAQ |
Details and caveats are in the guides on MDR, the statutory zero charge, the UPI MDR above ₹2,000, debit card caps and wallets and credit on UPI.
A worked month (illustrative)
A neighbourhood store takes ₹6,00,000 in a month through digital payments. Its mix and its offer, both illustrative, are:
| Method | Sales | Rate | Fee |
|---|---|---|---|
| UPI up to ₹2,000 | ₹2,40,000 | 0% | ₹0 |
| UPI above ₹2,000 (after UPI MDR starts) | ₹60,000 | 0.4% | ₹240 |
| RuPay debit | ₹60,000 | 0% | ₹0 |
| Other debit cards | ₹90,000 | 0.9% | ₹810 |
| Credit cards | ₹1,50,000 | 1.8% | ₹2,700 |
| Total | ₹6,00,000 | ₹3,750 |
Add a terminal rental of ₹500 and a soundbox rental of ₹150, so ₹4,400 of fees and rent, and 18% GST of ₹792: ₹5,192, or about 0.87% of digital sales. Credit cards are a quarter of sales but produce nearly three-quarters of the MDR (₹2,700 of ₹3,750). You can repeat this with your own numbers in the MDR fee calculator or get a quick range from the monthly cost estimator.
What drives your rate
- Card mix. Premium, corporate and international cards carry higher interchange than standard consumer cards.
- Channel. Online card payments usually cost more than card-present payments, because fraud risk is higher.
- Ticket size. The UPI threshold of ₹2,000 means a shop selling ₹300 items pays nothing on UPI while a furniture shop may pay on most UPI payments once the MDR starts.
- Category. NPCI applies a flat ₹5 to categories such as fuel, insurance, telecom, railways and utilities, and 0.02% to capital markets.
- Volume and negotiation. Larger merchants can negotiate custom pricing; small merchants usually get standard rates.
- Who the provider is. A bank acquirer, a payment aggregator and a gateway price differently; see the rules for payment aggregators.
Rules that apply to merchants in 2026
- Zero charge on specified modes. Section 10A of the PSS Act bars banks and system providers from charging, directly or indirectly, on notified electronic modes. Since 14 September 2026 these are RuPay debit cards and UPI up to ₹2,000.
- Obligation for larger businesses. A business with sales, turnover or gross receipts above ₹50 crore in the previous tax year must offer the prescribed electronic modes, under section 187 of the Income-tax Act, 2025 (formerly section 269SU of the 1961 Act).
- Payment aggregator regulation. The RBI's Master Direction on Regulation of Payment Aggregators (15 September 2025) covers online, physical and cross-border aggregators, escrow and merchant due diligence.
- No card storage. Merchants may not store card numbers; saved cards use tokens.
- Authentication. RBI's authentication directions in force from 1 April 2026 require two factors for digital payments, with at least one dynamic for payments other than card-present ones.
- GST at 18% on fees, rentals and service charges, with input tax credit for registered businesses; see GST on MDR and gateway fees.
How to cut the cost without losing sales
- Ask for separate rates per card type instead of a single blended rate. See comparing offers.
- Encourage UPI and RuPay debit at the counter, for example with a clear QR stand, but do not refuse cards you have agreed to accept or add a fee you are not allowed to add (see the surcharge guide).
- Check whether a rental waiver target is realistic for your sales.
- Reconcile settlement reports monthly to catch wrong rates.
- Claim GST input tax credit on fee invoices if you are registered.
FAQ
Do customers pay any of these fees?
UPI and RuPay debit are free for customers. MDR is paid by the merchant, and RBI and NPCI instructions say debit-card and UPI MDR should not be passed to customers.
Is MDR the same as interchange?
No. Interchange is the part that goes to the card issuer; MDR is the total the merchant pays, which also covers the network fee and the acquirer's margin.
Is the UPI MDR already charged?
Not as of 28 October 2026. NPCI said on 13 October 2026 that it will apply immediately after Diwali, on a date to be notified separately.
Does a small kirana pay UPI MDR?
Not on payments up to ₹2,000, and not at all while it qualifies as a P2PM merchant receiving UPI credits of up to about ₹1 lakh a month.
Sources
- Reserve Bank of India — Master Direction on Payment Aggregators, debit card MDR, tokenisation and authentication directions
- NPCI — UPI circulars and press releases, including the 13 October 2026 release on UPI MDR
- Department of Financial Services — FAQ on MDR on select UPI P2M transactions (15 September 2026)
- e-Gazette of India — S.O. 5067(E) of 14 September 2026 under section 10A
- Income Tax Department — section 187 of the Income-tax Act, 2025
- CBIC GST — GST rates on financial services
