The Union Finance Ministry on Thursday unequivocally cleared a long-standing ambiguity around digital payment charges by announcing that UPI transactions up to ₹2,000 will attract no fees whatsoever. The clarification comes after months of confusion among merchants, banks, and consumers about whether small-value digital payments would continue to be completely free.
According to the government's official statement, the directive applies not only to UPI-based transactions but also to payments made through RuPay debit cards. Both direct fees imposed by payment system operators and indirect charges collected by intermediaries fall under this exemption umbrella.
However, the government made it clear that the fee-free protection is limited to transactions of ₹2,000 and below. For payments exceeding this threshold, merchants retain the right to collect a processing fee from customers — a provision that was part of earlier policy discussions and has now been formally validated.
The legal backing for this decision rests on the Taxation and Other Laws (Amendment) Act, 2026, which was passed by Parliament in August this year. The legislation introduced amendments to Section 10A of the Payment and Settlement Systems Act, 2007 — the foundational statute that governs all payment infrastructures in India, including UPI, NEFT, and RTGS. Through this amendment, the central government was granted explicit authority to notify which categories of digital payments shall remain fee-free.
Financial experts have welcomed the move as a significant boost for digital inclusion, particularly for low-income households and small vendors who depend heavily on UPI for daily transactions. The Reserve Bank of India had previously capped merchant discount rates on micro-ATM and small-ticket UPI transactions, but the enforcement landscape remained unclear — leading to inconsistent practices across banks and payment apps.
Industry stakeholders noted that the ₹2,000 cutoff appears calibrated to cover the vast majority of everyday consumer transactions while allowing businesses handling larger payments a modest revenue buffer.
