Fees, Price Drivers and 2026 Rules
Zero MDR on RuPay debit and UPI: section 10A, the September 2026 notification and the ₹50 crore rule
Which payments merchants may not be charged for in India, what changed with the 2026 amendment and S.O. 5067(E), and when businesses must offer RuPay debit and UPI.
In India no bank or system provider may charge a merchant or a customer, directly or indirectly, for payments made by RuPay debit card or by UPI up to ₹2,000. This comes from section 10A of the Payment and Settlement Systems Act, 2007, and notification S.O. 5067(E) of 14 September 2026 issued by the Department of Financial Services. From 1 January 2020 until September 2026 the zero charge covered RuPay debit cards and BHIM-UPI and UPI QR payments of any amount; the 2026 change limits the UPI part to payments up to ₹2,000, which opened the door to the UPI MDR on select payments above ₹2,000. Separately, a business whose sales, turnover or gross receipts exceeded ₹50 crore in the previous tax year must offer the prescribed electronic modes under section 187 of the Income-tax Act, 2025. This guide explains both rules and what they mean for your fees. It belongs to the fees overview.
How the rule developed
| Date | Step |
|---|---|
| 1 Nov 2019 | Finance (No. 2) Act, 2019 inserts section 10A in the PSS Act and section 269SU in the Income-tax Act, 1961 |
| 30 Dec 2019 | CBDT notifies the prescribed modes under Rule 119AA: RuPay debit card, BHIM-UPI and BHIM-UPI QR code |
| 1 Jan 2020 | No MDR or other charge on those modes, for merchants or customers |
| Aug 2020 | CBDT circular says banks that charged on UPI after a number of free transactions breached the rule and should refund |
| 1 Apr 2026 | Income-tax Act, 2025 replaces the 1961 Act; the obligation to offer electronic modes is in section 187 |
| 17 Aug 2026 | Taxation and Other Laws (Amendment) Act, 2026 (No. 21 of 2026), section 2, changes section 10A from the date of its publication in the Gazette: the charge-free modes are now those the Central Government specifies by notification, instead of the modes prescribed under section 269SU |
| 14 Sept 2026 | S.O. 5067(E): charge-free modes are (i) debit cards powered by RuPay and (ii) UPI transactions up to ₹2,000 |
The text of S.O. 5067(E), as published in the Gazette of India, specifies "(i) Debit Card powered by RuPay; and (ii) Unified Payments Interface (UPI) transactions upto Rs. 2,000", and says that "no bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment" by those modes.
What "no charge" covers
- Who is protected: both the payer (your customer) and the receiver (you).
- Who may not charge: banks and system providers. In practice your acquiring bank or payment aggregator may not deduct MDR on these payments.
- Directly or indirectly: a fee repackaged as a "platform charge" or "per-transaction service charge" on these payments would be a breach. The 2020 CBDT circular asked banks to refund charges collected that way.
- RuPay debit has no amount limit in the notification; the ₹2,000 limit applies to UPI.
What it does not cover:
- Device rental for a terminal or soundbox is a separate service and may be charged. Ask whether any part of a rental depends on RuPay or UPI volumes.
- Gateway services beyond processing the payment, such as a website plugin, subscription or a payment link product, may be priced separately. Read the offer.
- Other debit cards (Visa, Mastercard) are not covered; RBI caps apply.
- Credit cards, including RuPay credit cards on UPI, follow card pricing.
- UPI above ₹2,000: no longer covered by section 10A. NPCI's framework sets a charge on select P2M payments, with exemptions.
Worked example (illustrative)
A pharmacy's monthly digital receipts:
| Method | Amount | Charge allowed? | Fee at illustrative rate |
|---|---|---|---|
| UPI up to ₹2,000 | ₹3,10,000 | No | ₹0 |
| UPI above ₹2,000 | ₹45,000 | Yes, once UPI MDR applies (0.4%) | ₹180 |
| RuPay debit, any amount | ₹55,000 | No | ₹0 |
| Visa/Mastercard debit | ₹40,000 | Yes, within RBI cap (0.9%) | ₹360 |
| Credit cards | ₹50,000 | Yes (1.8%) | ₹900 |
If the settlement report shows a deduction on the ₹3,10,000 or the ₹55,000, raise it with the acquirer in writing and ask for a refund. The MDR fee calculator can check each line.
The obligation for businesses above ₹50 crore
Section 187 of the Income-tax Act, 2025 (successor to section 269SU of the 1961 Act) requires every person carrying on business whose total sales, turnover or gross receipts exceed ₹50 crore in the immediately preceding tax year to provide facilities for accepting payment through the prescribed electronic modes, in addition to any others it offers.
| Point | What to know |
|---|---|
| Threshold | Sales, turnover or gross receipts above ₹50 crore in the previous tax year |
| Modes | Prescribed in rule 133 of the Income-tax Rules, 2026 (in force from 1 April 2026): RuPay debit card, BHIM-UPI and BHIM-UPI QR code, as under the old rule 119AA, plus, according to the Income Tax Department's rule text, Tier-III full-KYC CBDC (e-rupee) wallets. Confirm the current wording with your chartered accountant |
| Penalty | Under the 1961 Act, section 271DB provided ₹5,000 for every day of failure. Section 452 of the 2025 Act is reported to carry the same ₹5,000 a day; confirm with your chartered accountant |
| Practical step | Display a UPI QR at every counter and on invoices, enable RuPay debit on terminals and gateway, and keep evidence |
Businesses below the threshold are not obliged, but nearly all benefit from accepting UPI and RuPay debit because they cost nothing to accept up to the limits above.
What to check on your statements
- Ask your acquirer for a rate card that shows 0% on RuPay debit and UPI up to ₹2,000.
- Check monthly settlement reports for deductions on those lines.
- Watch for new "service" or "convenience" charges introduced after the September 2026 change.
- Keep device rental separate in your accounts.
- If an acquirer charges and will not refund, escalate to its grievance and nodal officer and then to the RBI complaint system (see official sources).
FAQ
Is a RuPay credit card on UPI free to accept?
No. The DFS/NPCI FAQ says credit-linked UPI payments follow credit product rules. Only RuPay debit cards are in the notification.
Does the ₹2,000 limit apply per payment or per day?
The notification says "UPI transactions upto Rs. 2,000", which reads as per transaction. A ₹2,500 payment is above the limit.
Can a bank refuse to give me a free UPI QR?
Banks set their own onboarding and account terms. They may not charge for the payment itself within the zero-charge modes.
Is GST payable on zero-MDR transactions?
Where there is no charge there is no fee to tax. GST applies only to fees actually charged; see GST on MDR.
Sources
- e-Gazette of India — S.O. 5067(E) of 14 September 2026 under section 10A
- Department of Financial Services — Payment and Settlement Systems Act, 2007 and UPI MDR FAQ
- India Code — consolidated text of the PSS Act
- Income Tax Department — section 187 of the Income-tax Act, 2025 and the rules on prescribed electronic modes
- NPCI — UPI and RuPay
