UPI Transactions Above ₹2,000 May Attract 0.4% Charge for Merchants; Small Vendors Exempt
Merchants may face a 0.4% charge on eligible UPI transactions above ₹2,000, while small vendors and person-to-person payments remain exempt under the proposed framework.
New Delhi: Merchants could face a 0.4% charge on certain UPI transactions above ₹2,000, while small vendors and person-to-person (P2P) transactions would remain exempt under the proposed arrangement outlined by the Ministry of Finance.
The proposal is aimed at addressing the cost of processing digital payments while ensuring that the widely used UPI system remains accessible for consumers and smaller businesses.
Small Vendors to Remain Exempt
According to the Ministry of Finance, small merchants and vendors would not be covered by the proposed charge, helping protect businesses that rely heavily on low-value digital payments.
The exemption is intended to ensure that small retailers, street vendors and other businesses handling smaller transactions can continue accepting UPI payments without an additional transaction charge.
0.4% Charge on Eligible Merchant Transactions
Under the proposal described by the ministry, a 0.4% charge would apply to eligible merchant UPI transactions above ₹2,000.
The charge would apply to the merchant side of qualifying transactions rather than to ordinary person-to-person transfers.
For example, if an eligible merchant transaction of ₹10,000 attracts a 0.4% charge, the charge would amount to ₹40.
The exact implementation mechanism, applicable categories and operational details would determine how the charge is ultimately applied.
Person-to-Person Transactions Exempt
The Ministry of Finance has also stated that person-to-person transactions would be exempt.
This is significant because UPI is extensively used for transferring money between individuals, including payments to family members, friends and other individuals.
According to the ministry, P2P transactions account for approximately 70% of the value of total UPI transactions, meaning the proposed charge would not apply to this large category of payments.
Limited Share of Merchant Transactions
The ministry has said that only around 4% of merchant transactions would attract the proposed charge.
This distinction is important because UPI handles a very large number of transactions every month across different categories, ranging from small retail purchases to higher-value merchant payments.
The proposed framework therefore separates transactions based on factors such as transaction type, merchant category and value.
