UPI users in India can breathe a sigh of relief. The government has clarified that ordinary users will continue to make UPI payments without transaction charges, putting to rest recent confusion over whether a new law could lead to fees on digital payments.

The clarification came after concerns emerged around a proposed amendment to the Payment and Settlement Systems Act, 2007. The government has said that the amendment does not automatically introduce charges on UPI transactions.

Will You Have to Pay for Sending Money Through UPI?

No. The government has clarified that person-to-person UPI transactions will continue to remain free.

So, if you send money to a family member, friend, or another individual through UPI, you should not suddenly see a transaction fee being deducted because of this amendment.

The clarification is particularly important because UPI has become one of the most commonly used payment methods for everyday transactions in India.

What About Paying Shops and Businesses?

The government has also clarified that the vast majority of merchant transactions will continue to remain free.

There has been discussion around Merchant Discount Rate, or MDR, which is a fee associated with processing certain digital payments. However, the proposed legal change is only an enabling provision and does not itself impose an MDR on every UPI transaction.

If an MDR is introduced in the future, the government says it would apply only to a limited category of merchant transactions above a specified threshold.

Why Did the Confusion Start?

The confusion arose after a proposed amendment to Section 10A of the Payment and Settlement Systems Act, 2007.

Some reports and social media posts interpreted the amendment as meaning that UPI charges would immediately be introduced. However, the government has clarified that this is not the case.

The amendment provides a framework that could allow certain charges in the future under specified circumstances. It does not automatically mean that users will now have to pay a fee every time they use UPI.

Will UPI Charges Be Introduced in the Future?

The government has left the possibility open for a limited MDR structure in the future, but it has stressed that such a charge would not apply universally.

If MDR is eventually introduced for qualifying merchant transactions, it is expected to be nominal and substantially lower than the MDR applicable to debit and credit card transactions.

For ordinary users, this means there is currently no reason to stop using UPI because of fears of an immediate transaction fee.

What Should UPI Users Be Careful About?

While transaction charges are not currently the main concern, UPI fraud remains an important issue.

Never share your UPI PIN, OTP, debit-card details, or banking password with anyone. Remember that you do not need to enter your UPI PIN to receive money.

Also check the recipient's name and payment details carefully before approving a transaction. Be particularly cautious of messages claiming that you need to pay a fee to "activate" or "upgrade" your UPI account.

The Bottom Line

The latest government clarification is good news for UPI users. Person-to-person UPI payments will remain free, while the vast majority of merchant transactions will also continue without charges.

The proposed legal amendment does not automatically introduce a UPI fee. If any Merchant Discount Rate is introduced in the future, it would be limited to specified merchant transactions rather than being imposed universally.

So, if you have seen messages claiming that every UPI payment will now attract a charge, there is no need to panic. The government has clarified that UPI payments remain free for users under the current framework.