New Delhi: The Centre has clarified that banks and payment system providers cannot levy any charges on UPI transactions of up to ₹2,000, under new rules notified by the finance ministry on Monday.
A gazette notification issued under the Payment and Settlement Systems Act, 2007 states that customers will not have to pay any charges on UPI transactions up to ₹2,000 or payments made through RuPay debit cards.
The clarification comes amid discussions over the possibility of charges being introduced on digital payments following Parliament’s passage of the Taxation and Other Laws Act.
Under the new notification, transactions up to ₹2,000 will remain completely free for customers. The government has, however, left open the possibility of charges being imposed on transactions above the specified threshold, subject to applicable rules.
The finance ministry has also made it clear that banks cannot recover charges for eligible transactions from customers either directly or indirectly.
MDR may apply to certain transactions
The government said that if the Merchant Discount Rate (MDR) is introduced in the future, it would apply only beyond a specified threshold and to certain commercial transactions.
MDR is the fee paid by merchants to banks or payment service providers for processing digital payments. Credit card transactions, for instance, can typically involve MDR ranging between 1% and 3%.
Earlier, the Lok Sabha had passed a bill through a voice vote amid disruptions, paving the way for changes to the legal framework governing charges on UPI and other digital payments.
The proposed amendment seeks to remove an existing provision under the Payment and Settlement Systems Act, 2007 that prevents banks and payment service providers from levying MDR on notified electronic payment methods. The change was introduced as part of wider legislation related to taxation.
