**Summary:**
This document summarizes the Indian government's policy regarding transaction charges on Unified Payments Interface (UPI) transactions, as addressed in Lok Sabha Unstarred Question No. 4111 on August 18, 2025. The query sought clarification on whether the Government/RBI proposed to impose transaction charges on UPI, the details thereof, and the impact on Digital India initiatives.
The Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary, responded that while an earlier NPCI circular (dated August 30, 2019) permitted acquiring banks to charge a Merchant Discount Rate (MDR) of 0.30% of the transaction value, Section 10A of the Payment and Settlement Systems Act 2007 prohibits banks or system providers from imposing charges on payers or beneficiaries using electronic modes prescribed under Section 269SU of the Income-tax Act, 1961. UPI and RuPay debit cards were notified as prescribed electronic modes of payment under Section 269SU of the Income-tax Act, 1961, via CBDT Gazette Notification No. 105/2019 dated December 30, 2019.
To ensure the continuity of UPI services, the government implemented an incentive scheme from FY 2021-22 to FY 2024-25, providing approximately ₹8730 Crores in incentive support.
The official response confirms that, as of August 18, 2025, there is no proposal to impose transaction charges on UPI.
Key Entities Referenced
Unified Payment Interface: A real-time payment system that facilitates transactions instantly between two bank accounts using a mobile platform.
National Payment Corporation of India: An organization that operates retail payments and settlement systems in India, including UPI.
Payment and Settlement Systems Act 2007: An act of the Indian Parliament that provides for the regulation and supervision of payment systems in India.
Incometax Act, 1961: The principal legislation governing income tax in India.
Central Board of Direct Taxes: A statutory authority functioning under the Department of Revenue, Ministry of Finance, Government of India. It provides inputs for policy and planning of direct taxes in India.
RuPay: An Indian multinational financial services and payment service system.
Digital India: A Government of India initiative to ensure that Government services are made available to citizens electronically by improved online infrastructure and by increasing Internet connectivity.
Merchant Discount Rate: The cost paid by a merchant for accepting payments from their customers via credit or debit cards.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO. 4111
ANSWERED ON MONDAY, AUGUST 18, 2025/SRAVANA 27, 1947 (SAKA)
TRANSACTION CHARGES ON UPI TRANSACTIONS
4111. SHRI ANAND BHADAURIA:
Will the Minister of FINANCE be pleased to state:
(a) whether the Government/RBI proposes to impose transaction charges on UPI transactions;
(b) if so, the details thereof;
(c) whether the Government has assessed the impact of imposing charges on UPI transactions on Digital
India initiatives;
(d) if so, the details thereof; and
(e) if not, the reasons therefor?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
a) to (e) Unified Payment Interface (UPI) transactions are facilitated by National Payment Corporation of
India (NPCI). Its circular dated 30.08.2019 had permitted the acquiring banks to charge Merchant Discount
Rate (MDR) at 0.30% of the transaction value. However, section 10A of the Payment and Settlement
Systems Act 2007, provides that no bank or system provider shall impose any charge on a payer making
payment, or a beneficiary receiving payment, through electronic modes prescribed under section 269SU of
the Income-tax Act, 1961. Accordingly, the Government vide Central Board of Direct Taxes (CBDT)
Gazette Notification No.105/2019 dated 30.12.2019, had notified UPI and RuPay debit card as prescribed
electronic modes of payment under section 269SU of the Income-tax Act, 1961.
In order to ensure continuity of the UPI services by the ecosystem partners, the Government had
implemented the incentive scheme during the last four years i.e. FY 21 – 22 to FY 2024 – 25. During this
period, the Government has extended incentive support of approximately ₹ 8730 Crores.
Presently, there is no such proposal to impose transaction charges on UPI.
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