Calculate 2026 UPI merchant MDR in ₹. 0.4% applies to eligible P2M transactions above ₹2,000 (cap ₹300), flat ₹5 for essential sectors, 0.02% for mutual funds. Effective 15 October 2026.
This calculator estimates the Merchant Discount Rate (MDR) framework announced by the Ministry of Finance and NPCI on 15 September 2026. Under this policy, 0.4% applies to eligible P2M transactions above ₹2,000 calculated on the full transaction amount, capped at ₹300, effective from 15 October 2026. Essential sectors (petrol, rail, telecom, insurance, agri-inputs, specified utilities) attract a flat ₹5 above ₹2,000. Capital-market UPI uses 0.02% capped at ₹300. P2P transfers and eligible P2PM kirana/street vendors (up to ₹100,000/month) remain at 0% MDR. MDR is a merchant-side payment processing charge under the UPI framework; customers do not pay MDR. Last verified: 16 September 2026.
Official sources: PIB 15 Sep 2026 · DFS FAQ (Official) · NPCI Circular & FAQ
Select transaction type — dukaan shop, small kirana QR, petrol/rail, mutual fund, or personal P2P.
Eligible P2PM small merchants covered by the zero-MDR framework can remain exempt according to the applicable monthly receipt/category rules (up to ₹1 Lakh per month via UPI QR).
MDR is deducted directly from the merchant-side settlement upon bank reconciliation. The customer pays the exact transaction amount; merchants cannot pass MDR or levy surcharges under UPI rules.
Settlement Breakdown
Shop / P2M (0.4%)
The announced 2026 UPI Merchant Discount Rate (MDR) policy introduces a 0.4% processing charge on commercial Person-to-Merchant (P2M) transactions exceeding ₹2,000, with a hard cap of ₹300 per transaction. All peer-to-peer (P2P) transfers (between friends, family, or personal accounts) and all merchant transactions up to and including ₹2,000 remain completely free with zero charges.
This framework is scheduled to take effect from 15 October 2026, following the official notification dated 15 September 2026. MDR is a merchant-side payment processing charge under the UPI framework and is deducted during bank settlement; customers do not pay MDR. Listed essential sectors (petrol, rail, telecom, insurance, agri-inputs, specified utilities) use a flat ₹5 MDR above ₹2,000. Mutual-fund and stockbroker UPI uses 0.02% (capped at ₹300). Kirana and street vendors under P2PM (up to ₹1 lakh/month on QR) stay at 0% MDR.
Pre-calculated merchant discount rates across common payment brackets under the 0.4% framework
| Transaction Amount | MDR Charge | Net Payout to Merchant | Effective Rate | Rule / Note |
|---|---|---|---|---|
| ₹1,500 | ₹0.00 | ₹1,500.00 | 0.00% | Below ₹2,000 — zero MDR |
| ₹2,000 | ₹0.00 | ₹2,000.00 | 0.00% | Exact ₹2,000 threshold — zero MDR |
| ₹5,000 | ₹20.00 | ₹4,980.00 | 0.40% | Standard P2M 0.4% |
| ₹20,000 | ₹80.00 | ₹19,920.00 | 0.40% | Standard P2M 0.4% |
| ₹75,000 | ₹300.00 | ₹74,700.00 | 0.40% | ₹300 cap starts here |
| ₹100,000 | ₹300.00 | ₹99,700.00 | 0.30% | Above cap — still ₹300 |
MDR is a merchant-side payment processing charge under the UPI framework. It is charged directly to the business (acquiring merchant), not the individual buyer. Surcharging customers for using UPI or QR codes remains strictly prohibited. If a customer buys goods worth ₹5,000 via UPI, they pay exactly ₹5,000, while the merchant receives ₹4,980 after the ₹20 MDR deduction.
GST may apply to the MDR/processing fee depending on the applicable tax treatment and service provider. GST-registered businesses may be eligible for ITC where applicable. Keep this commercial tax aspect clearly separate from the headline MDR computation.
Even with the 0.4% MDR framework, UPI remains substantially cheaper than traditional card POS terminals. Standard credit card MDR typically ranges between 1.5% and 2.5% without a fee ceiling. On a ₹1,00,000 purchase, a credit card swipe could cost ₹2,000 in MDR, whereas the same transaction via UPI is capped at exactly ₹300.
Eligible P2PM small merchants covered by the zero-MDR framework can remain exempt according to the applicable monthly receipt/category rules (up to ₹1 Lakh per month via UPI QR). Verify with your acquiring app (PhonePe for Business, Google Pay for Business, Paytm, BharatPe) regarding your account classification.
P2P is sending money to family or your own account — always free. P2M is a formal merchant QR or VPA. Eligible P2PM small merchants covered by the zero-MDR framework can remain exempt according to monthly receipt rules (up to ₹1 lakh/month).
On standard P2M, payments up to ₹2,000 stay at 0% MDR. 0.4% applies to eligible P2M transactions above ₹2,000 calculated on the full transaction amount.
For a ₹5,000 payment, the merchant pays ₹20 MDR. At ₹75,000 the 0.4% equals ₹300. Any larger P2M ticket (e.g. ₹1,00,000) is charged the ₹300 cap.
Official notifications list railways, telecom, insurance, fuel, agricultural inputs, and specified public utilities for a flat ₹5 MDR on tickets above ₹2,000.
Capital-market UPI (mutual funds, securities, SEBI-registered brokers, and dealers) attracts 0.02% MDR, capped at ₹300.
MDR is a merchant-side payment processing charge under the UPI framework. Customers do not pay MDR under the announced framework.
Quick answers about how this tool works.
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