UPI New Rules 2026: What You Need to Know About P2P Payments and Monthly Limits

If you opened any news application this week, there is a possibility that you saw a news item which implies that UPI is going to charge you from next month. There will be no charges but some facts that have actually been changed. Let’s look into them in detail as it is crucial for anyone running any kind of business or even selling online.

Merchant Discount Rate Framework for UPI, by National Payments Corporation of India, becomes effective from 15 October 2026 and there is also an earlier system of limits that most people misunderstand. This is what actually happened:

What will be different from 15 October

Starting from that date, all person to merchant UPI transactions exceeding ₹2,000 will incur an MDR of 0.4%. The fee is capped at ₹300 for any transaction over ₹75,000, meaning that any transaction worth ₹1 lakh will incur a fee of ₹300 rather than ₹400. All transactions below ₹2,000 remain free from MDR as NPCI mentioned that they account for over 95% of all P2M transaction volume.

Railway services, telecoms, insurance products, and fuel are charged a fixed ₹5 per transaction and not the percentage charge.

Payment	Type	MDR from 15 Oct 2026
₹500 to a tea stall	P2M / P2PM	Nil
₹3,000 online order	P2M	₹12 (merchant pays)
₹50,000 purchase	P2M	₹200 (merchant pays)
₹1,00,000 purchase	P2M	₹300 (capped)
₹8,000 fuel bill	Specified category	₹5 flat
Splitting dinner with a friend	P2P	Nil

P2P transactions: no change

It is here where clarity becomes important. Peer-to-peer UPI transactions will be exempted from MDR. Transferring money to a parent, sharing costs of a meal, repaying debt to a friend, transferring money to your linked accounts through UPI – all of these remain free irrespective of the amounts involved.

On two other points, NPCI has been clear in the interest of protecting consumers from any unfair practices by merchants. The first is that UPI apps are forbidden from imposing platform fees or any other charges on their customers while effecting UPI transactions. Second, merchants are prohibited from levying the MDR on consumers as a UPI charge. Thus, you pay ₹3,000 if the cost of an article is ₹3,000 whether you scan its QR code or pay in cash.

When the actual “monthly limit” comes into play

The ₹1 lakh monthly number being shared around is not the limit to how much you can transfer. Rather, it is the minimum limit for the P2PM account, which is the small merchant account that NPCI had introduced for those street vendors, kirana stores, auto rickshaw operators and other micro merchants who accept payment directly from UPI into their individual or small merchant accounts using QR code.

These merchants pay no MDR charge for as long as their UPI collection is below ₹1 lakh per month. Importantly, getting even a single UPI transaction above ₹2,000 will not change their status to start paying MDR. The category classification depends on the category of the account holder’s account and not the transaction amount.

P2PM Account Classification

In case the merchant starts getting ₹1 lakh monthly UPI collection for three consecutive months, the acquiring bank/ payment service provider shall classify it as a regular P2M account and impose MDR for transactions above ₹2,000, which qualify to pay MDR.

Important Points for Merchants

No GST registration is necessary in order to benefit from P2PM Zero MDR status.

Eligibility is based on monthly transaction limit and type of account, regardless of tax registration.

No additional devices required. Your existing QR codes, QR stands, and soundboxes shall be functional without any issue. No one needs to get his QR code re-registered or visit the bank branch in context of this system.

The limit which defines your maximum capacity to send money

In spite of any fee structure, UPI has transaction limits right from the start, which are responsible for most of the failed transactions. The current P2P transaction ceiling by NPCI is ₹1 lakh per day, and it has remained unchanged in each of 2026 changes. Some details are easily overlooked:

UPI Transaction Limit Details

The ceiling applies in total for all your UPI apps using a given bank account, not per app.

This ceiling is calculated within a rolling 24-hour period starting from your first transaction, not between midnight and midnight. Send ₹80,000 at 10 AM and you have ₹20,000 available for the next 24 hours until 10 AM.

Most banks impose a limit on number of transactions per 24 hours, which is around 20 UPI transactions.

The default limit at your bank could be lower than ₹1 lakh, usually ₹50,000 in case you’ve just opened an account. It can be increased from the UPI settings in the bank app.

If you have a newly created UPI ID or just linked an account, then the transaction limit for the next 24 hours will be limited to ₹5,000.

Higher UPI Limits for Verified Merchants

There are higher limits, but only on the merchant’s part. Starting 15 September 2025, verified merchants from certain categories – insurance premiums, capital markets, travel, collections and Government e-Marketplace – accept transactions worth up to ₹5 lakh each and ₹10 lakh within the 24-hour period. Transactions made while paying the credit card bills allow ₹5 lakh per transaction, but there is the lower ₹6 lakh daily aggregate limit. None of that changes the P2P limit.

UPI Biometric Transaction Limit

Here’s another change from 2026 worth your attention: The upper limit for transactions approved by using on-device biometrics – fingerprint or face unlock – was raised from ₹5,000 to ₹10,000 per transaction starting 7 August 2026. Using biometrics is not required and neither is the UPI PIN.

AutoPay Mandates

For utility bills, OTT subscriptions, and SIPs via recurring UPI mandates, there will be no specified MDR charge to be levied on consumers. In particular, those who have mutual fund investments should know the difference between recurring UPI mandates and a one-time UPI transaction because in case of investing in one lump sum without a mandate, check your platform.

Why now?

As per NPCI, the rationale behind this decision is that UPI transactions have been as many as 2,451 crore transactions worth ₹29.9 lakh crore in just the month of August 2026, and therefore require regular funds for building resilience against cybersecurity risks, infrastructure maintenance, and customer services. 4% of all merchant transactions are estimated to be impacted. The total 5% of all MDR collected amount will be reserved for promoting UPI transactions among small merchants.

Three point checklist

In case of paying/ transferring: no change needed. No MDR, no limits, no changes in apps.

In case of sales, find out from your bank or PSP what type of account yours is.

confirm whether the recipient is a verified merchant in a high-value category, check your bank’s own ceiling, and remember that the per-transaction and 24-hour aggregate limits are two different things.

Disclaimer: The information provided is for general purposes only and does not constitute professional advice. The author and publisher do not guarantee the accuracy or completeness of the content. Business decisions should be made after thorough research and consultation with professionals. The mention of specific companies or products does not imply endorsement. Financial estimates are based on available data and may change. The author and publisher are not liable for any actions taken based on the content. Readers are advised to independently verify information before making business or financial decisions.