Government clarifies proposed PSS Act amendment, says UPI users will not be charged for transactions
New Delhi : The Government of India has clarified that consumers making payments through the Unified Payments Interface (UPI) will not be charged any transaction fee.
The government also stated that person-to-person (P2P) UPI transactions will continue to remain completely free, while most merchant transactions will also remain free.
The clarification comes amid discussions surrounding the proposed amendment to the Payment and Settlement Systems Act, 2007, and concerns that changes to the law could lead to transaction charges for ordinary UPI users.
No Charges for UPI Users
The government has categorically stated that consumers using UPI to make payments will not have to pay any transaction charges.
All routine person-to-person (P2P) transactions will continue to remain free, as they have been.
For merchants, the government clarified that if a Merchant Discount Rate (MDR) is introduced, it would apply only to a limited category of merchant transactions above a prescribed threshold.
The government said any such MDR would be nominal and significantly lower than MDR applicable to debit or credit card transactions.
Therefore, the majority of merchant transactions conducted through UPI are expected to remain free of transaction charges.
Who Will Decide on MDR?
Following Parliament’s passage of the Taxation and Other Laws (Amendment) Bill, 2026, which proposes amendments to Section 10A of the Payment and Settlement Systems Act, 2007, any decision regarding MDR, if required, would be taken by the UPI and Services Steering Committee chaired by the National Payments Corporation of India (NPCI).
The government has described the amendment to the PSS Act as an enabling provision, rather than a move to impose charges on ordinary UPI users.
Why Is the PSS Act Being Amended?
The government said the proposed changes are aimed at ensuring the long-term sustainability, technological advancement, resilience and security of India’s UPI ecosystem.
With UPI transaction volumes growing rapidly, continuous investment is required in areas such as:
- Cybersecurity
- Fraud prevention
- Digital payment infrastructure
- Technology upgrades
- System resilience and reliability
The government said a sustainable framework is necessary to ensure that UPI can continue to support India’s rapidly expanding digital economy.
Need for a Sustainable Revenue Model
The government also highlighted the need to encourage greater competition and participation in India’s digital payments sector.
As more companies expand their operations in digital payments, developing a self-sustaining revenue model could help strengthen the ecosystem and support continued innovation.
The government said relying entirely on subsidies for UPI’s future growth may not be sustainable in the long term. A balanced framework is therefore required to keep UPI strong, inclusive, affordable and future-ready.
Government Rejects Claims of External Pressure
The government rejected media reports suggesting that external influence may have played a role in the proposed policy changes.
It described such claims as unfounded, false and misleading.
The government said that if external pressure had been a factor, it would not have introduced UPI in 2016, continued to support a zero-charge framework for consumers and merchants since January 2020, or worked to develop UPI into one of the world’s largest real-time interoperable payment systems.
UPI’s Rapid Expansion
Since its launch in 2016-17, UPI has transformed India’s digital payments landscape and emerged as one of the world’s most inclusive and dynamic payment ecosystems.
The platform enables real-time and interoperable payments and has become deeply integrated into everyday economic activity, from small retail purchases to larger digital transactions.
According to the government, UPI processed 23.66 billion transactions in July 2026, with a total transaction value of approximately ₹29.9 trillion.
UPI is also now available in 11 foreign countries, while several other countries have expressed interest in adopting or integrating with the platform.
Next Phase of India’s Digital Payments Growth
India is now entering the next phase of digital payments growth, with significant potential for further expansion of UPI across rural and semi-urban areas.
The government said maintaining a sustainable and affordable UPI ecosystem will be essential for preserving India’s competitive advantage in digital payments and expanding its international footprint.
The proposed PSS Act amendment is being positioned as a forward-looking measure intended to ensure that UPI continues to develop as a secure, affordable, inclusive and globally recognized payment system.
Government’s Key Clarifications
The Government of India reiterated that:
- UPI will remain free for consumers.
- Routine UPI transactions by citizens will not attract transaction charges.
- P2P UPI transactions will continue to remain free.
- If MDR is introduced in the future, it will be nominal and applicable only to a limited category of merchant transactions above a prescribed threshold.
- Most merchant transactions will remain charge-free.
- UPI will continue to be developed as a major Indian digital innovation with global ambitions.
The government also urged citizens to rely only on official information issued by the Ministry of Finance, Reserve Bank of India (RBI) and NPCI, and avoid forwarding unverified messages.
UPI, developed in India and for India, has become a major national digital infrastructure. The government said it remains committed to keeping UPI affordable for citizens while ensuring the platform remains financially sustainable, technologically advanced and capable of serving India’s digital economy for decades to come.
