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UPI MDR Calculator

Last verified: 24 Sept 2026

Governed by NPCI Guidelines & Payment and Settlement Systems Act.

⚠️ Upcoming NPCI Rule Update (Effective 15 October 2026):

NPCI has revised the merchant interchange framework taking effect 15 October 2026: a standard 0.4% MDR applies to commercial P2M transactions above ₹2,000 (capped at ₹300), flat ₹5 on essential utilities/fuel, while transactions up to ₹2,000 and small merchants (up to ₹1L/month) remain 100% free (0% MDR).

₹

Gross value of UPI merchant transactions processed monthly

%

Percentage of volume from interchange-eligible methods (> ₹2,000)

%

Standard interchange fee rate (typically 0.9% to 1.1%)

%

Standard statutory GST levied on payment processing services

Results

Net Monthly Settlement
₹4,98,702
Total Fee Deductions₹1,298
Base MDR Fee₹1,100
GST (18% on MDR)₹198
Effective Processing Cost0.260%

Jurisdiction: India (INR locked). Compliant with NPCI circulars; zero surcharge can be passed onto consumers.

How UPI MDR & interchange fees are calculated

Under National Payments Corporation of India (NPCI) directives, standard peer-to-peer (P2P) and person-to-merchant (P2M) bank account transfers carry zero MDR. Interchange fees apply strictly when consumers pay merchants via Prepaid Payment Instruments (wallets like Paytm, PhonePe Wallet) or RuPay Credit Cards on UPI for transactions exceeding ₹2,000:

Step 1: Determine Chargeable Merchant Volume

Chargeable Volume = Total Monthly Volume × (Chargeable Share % ÷ 100)

Step 2: Compute Base Merchant Discount Rate (MDR)

Base MDR Fee = Chargeable Volume × (Interchange Rate % ÷ 100)

Step 3: Levy Statutory 18% GST on Financial Services

GST Amount = Base MDR Fee × 18%

Step 4: Net Payout Credited to Business Account

Net Bank Settlement = Total Monthly Volume − (Base MDR Fee + GST Amount)

Step-by-step worked example: Retail Merchant

Consider a retail merchant in Pune processing ₹5,00,000 in total monthly digital collections through merchant QR codes. Customer payment analytics indicate that 80% (₹4,00,000) are direct savings bank transfers (0% MDR), while 20% (₹1,00,000) are paid using PPI wallets or RuPay credit cards on UPI at a standard 1.1% interchange rate:

Total Monthly UPI Volume:₹5,00,000
Free Bank-to-Bank Volume (80%):₹4,00,000 (₹0 fee)
Chargeable Volume (20% via PPI / RuPay Credit):₹1,00,000
Base MDR Fee (₹1,00,000 × 1.1%):₹1,100
GST on Processing Fee (18% × ₹1,100):₹198
Total Payment Processing Deductions:₹1,298
Net Monthly Bank Settlement:₹4,98,702

Effective Acceptance Cost: ₹1,298 ÷ ₹5,00,000 = 0.260%. This represents substantial operational savings compared to traditional card POS machines (which average 1.75% to 2.50%).

NPCI regulations, interchange tiers & tax rules

Zero Surcharge on Consumers

NPCI guidelines explicitly mandate that merchants cannot pass interchange costs onto buyers as convenience fees or checkout surcharges. Payment via UPI must remain 100% free for consumers.

₹2,000 Ticket Size Threshold

Wallet and prepaid instrument interchange fees apply exclusively to transactions strictly above ₹2,000. High-volume, low-ticket retail transactions remain completely exempt from MDR deductions.

Input Tax Credit (ITC) Recovery

GST-registered merchants can claim the 18% GST levied on payment aggregator MDR invoices as Input Tax Credit (ITC) in their monthly GSTR-3B filings, offsetting taxes on outward goods or services.

Category Code (MCC) Concessions

Merchants in government services, agriculture, utilities, fuel, and education enjoy capped or reduced interchange tiers (typically 0.5%–0.7%) compared to the standard 1.1% commercial cap.

Managing commercial cash flow and working capital velocity?Read our corporate liquidity analysis on Cash Conversion Cycle (CCC): Working Capital Efficiency & Liquidity Management to learn how merchant collection speeds affect business solvency.

Frequently asked questions

Does a consumer ever pay MDR on UPI transactions in India?
No. Per NPCI regulations, customers are never charged any fee or surcharge for paying via UPI, RuPay credit cards on UPI, or prepaid digital wallets. The MDR fee is strictly borne by the receiving merchant.
What UPI transactions are subject to MDR in India?
Normal peer-to-peer (P2P) and person-to-merchant (P2M) bank-to-bank UPI transfers carry zero MDR. Interchange fees apply to merchant transactions over ₹2,000 made via Prepaid Payment Instruments (wallets like Paytm/PhonePe Wallet) or RuPay Credit Cards linked to UPI.
Can businesses claim Input Tax Credit (ITC) on the 18% GST charged on MDR?
Yes. If your business has an active GST registration, you can claim the 18% GST charged by your payment aggregator on MDR fees as Input Tax Credit (ITC) in your monthly GSTR-3B filings.
What is the standard interchange rate for PPI wallet merchant transactions?
NPCI guidelines prescribe an interchange fee of up to 1.1% on PPI merchant transactions above ₹2,000, depending on the merchant category code (MCC), with lower tiered rates for essential sectors like utilities, fuel, and education.
How does ticket size impact merchant interchange costs?
Small transactions of ₹2,000 or less have zero interchange fee for merchants under PPI wallet guidelines. Businesses with high-volume, low-ticket sales (like tea stalls or convenience stores) face effectively zero MDR costs.

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Estimated Net Settlement

₹4,98,702