New UPI Rules 2026: Changes Coming Into Effect in October

In the digital era, the banking and payment system was reformed with digital payments, and the Unified Payments Interface (UPI) became one of the most convenient ways to make digital payments in India. In between them, there are some changes related to the transaction charges that are supposed to be imposed on the business or merchant account. However, UPI is being used for everything from paying at local shops to transferring money to friends and family members, and many more. There are multiple prominent UPI apps like Google Pay, PhonePe, Paytm, and BHIM, etc and people are using them. So, with new UPI payment rules, some updates must be in the mind of the user, especially the charges related to the merchant account. Let’s have a look at the details. 

What are the new UPI transaction rules 2026

As per the information, the new UPI payment rules were supposed to be introduced on October 15, 2026. The NPCI (National Payments Corporation of India) has announced that these rules might be implemented, considering financial inclusion; there are no changes to person-to-person transactions, and they will be free up to the limit. Whereas person-to-merchant transactions will be chargeable. A brief detail related to transactions will be as follows.

New UPI Rules in October 2026

The new UPI charges have been updated as per the sender’s profile and account. There are no charges on person-to-person transfers. Charges are applicable for person-to-merchant transfers. So, brief details are as follows. 

Charges on Selected Merchant Payments

As per the implemented charges, the proposed charges, i.e., a Merchant Discount Rate (MDR) of 0.4% on specified person-to-merchant (P2M) transactions above ₹2,000, are supposed to be applicable. This fee has been designed and implemented for the eligible payment ecosystem participants. However, it must be noted that it is designed as a direct charge on customers.

Person-to-Person Free Transfers 

Even after the new UPI rules, the Person-to-Person transaction is still free, and therefore there is no need to worry about the new rules. It has been implemented only for the merchant account.

Merchant Payments Up to ₹2,000 Remain Free of MDR

Even after this, UPI merchant transactions of up to ₹2,000 are still free of MDR. So the payments received by eligible small merchants under the applicable zero-MDR framework can be safe, and with small transactions, you might have no need to pay the extra charges.

No Charges for Consumers

With these new rules, the government has clearly announced that the proposed MDR is only applicable to the merchant side. It is not a general transaction charge and has not been imposed on individuals. It has been clearly instructed to Banks and payment providers to avoid any charges. 

These are the key developments in the new UPI payment rules. Since implementation has been postponed, users and merchants should check the latest NPCI updates before making decisions based on the proposed rates.

Common purposes where UPI is used?

UPI is used for multiple digital payments and is used for multiple reasons, like shopping, bill payments, ticket booking, and other payments where you are redirected to your UPI app directly for a hassle-free repayment. Some common uses are as follows. 

• Using at Local Shops: You can pay at grocery stores, restaurants and other retail outlets where a QR code makes the payment simple, and you can directly repay by scanning the QR.
• Online Shopping: While using any E-commerce website, there are repayment options that help you complete repayment directly. In many cases, the amount to be paid is directly generated, and you can accept the repayment for easy and direct repayment options. 
• Bill Payments: In the bill Payment options, there are direct support for electricity, mobile, broadband and other utility bills and you can directly fetch the remaningn bills for repayment.
• Money Transfers: There are direct transfer options for friends, family members and other individuals, and you can use them simply by using their linked mobile number. 
• Travel Bookings: UPI can be used to pay for flight tickets, train, bus and other bookings like hotels.
• Subscriptions: It can also be used to make supported recurring payments through UPI AutoPay mandates for maintaining subscriptions
• Donations and Services: You can directly pay for the donation through the linked QR code without any additional account transfer process.

How to Avoid Unnecessary Charges while using UPI

As per the new UPI rules, common users don’t have any problem with the imposed charges, and they should not stop using UPI because of the proposed merchant-side MDR. However, depending on charges and common usage, taking some precautions can help you manage payments by avoiding unexpected charges, and these are as follows.

Use registered UPI Apps only: You must download the payment applications from trusted app stores. You must check its rating and check that the app is genuine.

Always Check the Amount: Always verify the name and transaction amount before entering sending the final amount. 

Avoid Paying Unauthorised Fees: Always avoid visiting any suspected website because it can lead to a financial trap and difficulties. 

Review the Payment Screen: Read the amount and any displayed fee before confirming a transaction.

Avoid Fake Refund Links: If you receive any suspected link for payment, etc. Avoid visiting that link or downloading files. 

Report Suspicious Transactions: for any suspected transaction, immediately contact your bank or UPI app’s official support. 

Conclusion

As per the implementation of  UPI new rules 2026, the common user sending money from person to person will not have to pay any additional charges. But person-to-merchant account transfers can be different and chargeable. So, before using UPI for any payment, always verify the receiver’s account details. Never use any unauthorised link to keep digital safety.