UPI MDR Calculator: What the 0.4% Fee Actually Costs
From 15 October 2026 a 0.4% Merchant Discount Rate applies to qualifying UPI merchant payments above ₹2,000. Put in any amount to see the fee, the 18% GST charged on top of it, what reaches your account, and what it really costs you once input tax credit is counted. Customers are never charged. Nothing is uploaded.
The default treatment for a registered P2M merchant: 0.4% of the whole payment on anything above ₹2,000, never more than ₹300 on a single transaction.
You keep
₹4,528.52
out of ₹4,550 received
TL;DR
If you pay by UPI, nothing has changed — you are not charged, and a merchant is not allowed to add the fee to your bill. If you receive money as a business, a qualifying payment above ₹2,000 now costs 0.4% of the whole payment, never more than ₹300, plus 18% GST on that fee which a GST-registered merchant claims back. A ₹10,000 sale costs ₹40, or ₹47.20 before the credit. Small merchants taking up to ₹1 lakh a month by QR pay nothing at all, and so does anyone on a payment of ₹2,000 or less.
The arithmetic, written out
There are only three lines to it, and the calculator above is doing exactly this:
GST = MDR × 18%
You receive = payment − MDR − GST
The detail that trips people up is in the first line. The percentage is applied to the payment in full, not to the slice above the threshold. A ₹10,000 sale is charged 0.4% of ₹10,000 — ₹40 — and not 0.4% of the ₹8,000 above ₹2,000, which would be ₹32. The ₹2,000 figure is a switch, not a deductible. It decides whether the fee applies; it never reduces the base it applies to.
What every payment size costs
The last column is the one worth looking at twice. The effective rate is flat at 0.472% — 0.4% plus its GST — all the way up to ₹75,000, and then it falls, because the fee stops growing while the payment keeps going.
| Payment | MDR | GST | Deducted | You receive | Effective |
|---|---|---|---|---|---|
| ₹500 | ₹0 | ₹0 | ₹0 | ₹500.00 | 0% |
| ₹2,000 | ₹0 | ₹0 | ₹0 | ₹2,000.00 | 0% |
| ₹2,500 | ₹10.00 | ₹1.80 | ₹11.80 | ₹2,488.20 | 0.472% |
| ₹4,550 | ₹18.20 | ₹3.28 | ₹21.48 | ₹4,528.52 | 0.472% |
| ₹10,000 | ₹40.00 | ₹7.20 | ₹47.20 | ₹9,952.80 | 0.472% |
| ₹25,000 | ₹100.00 | ₹18.00 | ₹118.00 | ₹24,882.00 | 0.472% |
| ₹75,000 | ₹300.00 | ₹54.00 | ₹354.00 | ₹74,646.00 | 0.472% |
| ₹1,00,000 | ₹300.00 | ₹54.00 | ₹354.00 | ₹99,646.00 | 0.354% |
| ₹5,00,000 | ₹300.00 | ₹54.00 | ₹354.00 | ₹4,99,646.00 | 0.071% |
Standard merchant category. Effective rate includes the 18% GST on the fee; for a GST-registered merchant reclaiming that credit, every effective figure drops to 0.4% and below.
The GST on the fee, and why it is not really a cost
GST at 18% is charged on the MDR — on the fee, not on the payment. This is worth stating twice because the phrase “18% GST on UPI” has been doing the rounds in a way that suggests something far more alarming than what is happening. On a ₹10,000 sale the tax is 18% of ₹40, which is ₹7.20. It is not 18% of ₹10,000.
If you are GST-registered, that ₹7.20 is input tax credit and comes back to you, so your actual cost is the ₹40. If you are not registered, or you supply exempt goods and cannot claim full credit, you genuinely bear the whole ₹47.20 — an 18% difference in what this costs, decided entirely by your registration status. That is why the calculator asks and shows you both numbers rather than picking one.
Not everyone pays 0.4%
| Who you are | What you pay | The detail |
|---|---|---|
| Standard merchant | 0.4%, capped at ₹300 | Retail, food, services, e-commerce — the default for a registered P2M merchant above ₹2,000. |
| Small merchant (P2PM) | Nothing | Up to ₹1 lakh a month received by UPI QR. GST registration is not required to qualify. |
| Railways, telecom, insurance, fuel, agri inputs | Flat ₹5 | A fixed amount per qualifying transaction instead of a percentage, so size stops mattering. |
| Capital markets | 0.02%, capped at ₹300 | One-twentieth of the standard rate, reflecting how large and frequent these transfers are. |
| Educational institutions | Concessional — confirm | Announced as concessional with caps, but no single published figure. Ask your acquirer rather than assuming. |
| Anyone, at ₹2,000 or below | Nothing | The threshold applies to everyone. Person-to-person transfers are outside the framework at any value. |
The small-merchant row is the one that covers the most people. If your UPI QR receipts stay within ₹1 lakh a month you are outside this entirely, and you can check where you stand with the P2PM limit checker.
Why splitting a bill is not the answer
The idea occurs to everyone within about a minute of reading the rule: if the fee starts above ₹2,000, take ₹4,550 as three payments instead of one. Run the numbers before you build a habit around it. The MDR on ₹4,550 is ₹18.20, and the GST on that is ₹3.28 — which you reclaim if you are registered. So the real saving is ₹18.20.
For that ₹18.20 you are asking a customer to approve three payments at your counter, and you are creating a deliberate pattern of structuring around a regulated charge — exactly the shape of behaviour acquirers look for. If the fee genuinely hurts your margin, the honest fix is to price for it: the price increase calculator shows that absorbing 0.4% on a ₹3,000 item takes a rise of under half a percent. What you must not do is add a UPI surcharge at the till; passing MDR to the customer is not permitted.
Working backwards to a clean amount
Sometimes the number you care about is what lands in the account — an invoice that has to settle at exactly ₹50,000, say. Grossing up by adding 0.4% does not work, because the fee is charged on the larger amount, and it fails completely above ₹75,000 where the cap flattens everything. Switch the calculator to What must they pay me? and it solves the equation instead: it finds the payment that leaves your target behind after the deduction, handles the cap separately, and round-trips to the paisa. Do bear in mind that a payment adjusted this way is still the invoice value your customer sees, so use it for quoting rather than for quietly recovering the fee.
Questions people are actually asking
Will I be charged for paying by UPI?
No. If you are the person making the payment, nothing changes and nothing is deducted from you. The MDR is a merchant charge, taken from the business receiving the money, and merchants are not permitted to add it to your bill as a separate line. Person-to-person transfers — paying a friend, sending money home, splitting a bill between individuals — stay outside the framework entirely, at any amount. If a shop tells you there is a UPI fee to pay, that is not how the rule works.
Is the 0.4% charged on the whole payment or only the part above ₹2,000?
On the whole payment. This is the single most common misreading, and it makes a real difference. A ₹10,000 payment is charged 0.4% of ₹10,000, which is ₹40 — not 0.4% of the ₹8,000 above the threshold, which would be ₹32. The ₹2,000 figure decides whether the fee applies at all, not how much of the payment it applies to. The government’s own worked example uses ₹40 on ₹10,000, which settles the question.
What is the GST on MDR, and do I get it back?
GST of 18% is charged on the MDR itself, not on the payment. On a ₹10,000 sale the MDR is ₹40 and the GST on that fee is ₹7.20, so ₹47.20 leaves your account in total. A GST-registered merchant can claim that ₹7.20 back as input tax credit, which makes the real cost the bare ₹40. A merchant who is not registered, or who deals in exempt supplies and cannot claim full credit, genuinely bears the whole ₹47.20. The calculator shows both figures because the gap between them matters at volume.
What is the maximum MDR on a single UPI transaction?
₹300, and it applies from ₹75,000 upwards. That is not a coincidence: 0.4% of ₹75,000 is exactly ₹300, so the percentage and the cap meet at that value and the fee stops growing above it. The practical effect is that the effective rate falls the larger the payment gets. A ₹75,000 payment costs 0.4%, a ₹3 lakh payment costs 0.1%, and a ₹10 lakh payment costs 0.03%. With 18% GST the cash deducted at the cap is ₹354.
Which merchants pay nothing at all?
Small merchants classified under P2PM, who receive up to ₹1 lakh a month through UPI QR codes, continue at zero MDR at every payment size, and GST registration is not required to qualify. Separately, any payment of ₹2,000 or less attracts nothing regardless of who receives it, so a business whose typical sale is small may owe nothing even without small-merchant status. Certain sectors — railways, telecom, insurance, fuel and agricultural inputs — pay a flat ₹5 rather than a percentage.
Can I split a bill into smaller payments to stay under ₹2,000?
It is a bad idea, and the saving is smaller than people assume. Splitting a ₹4,550 sale into three payments saves ₹18.20 of MDR plus ₹3.28 of GST — and if you are GST-registered you were getting that ₹3.28 back anyway, so the real saving is ₹18.20. Against that you are asking a customer to authorise three payments instead of one, and deliberate structuring to avoid a regulated charge is the kind of pattern acquirers monitor. Raising your price by a fraction of a percent, which this site has a separate calculator for, achieves the same thing without the risk.
Where these rules come from
The framework was announced on 15 September 2026 and takes effect on 15 October 2026. The figures here follow the Department of Financial Services FAQs on MDR for select UPI (P2M) transactions, NPCI’s accompanying clarifications, and reporting on the 18% GST and input tax credit.
General information, not financial, tax or legal advice. Rates and classifications can change, and how your own account is treated is determined by your bank or payment provider rather than by this page. Confirm anything you intend to rely on with them or with a qualified adviser.