These days, a very big message is being forwarded on WhatsApp and social media. People are scared that the government has announced charges on UPI. Hearing this, everyone thinks that now they will have to pay extra money for groceries or rent through UPI.
If you have also received this heavily forwarded message, there is no need to panic.
Straight talk: Your normal UPI transfer is completely free. The government has not imposed any new tax or charge on common people.
So what is all this about? I will explain it to you in 5 points in very simple language, so you don't need to read any other article.
Why the UPI Rumor Mill is So Active
Your UPI Transfer is Free (Just Like Before)
If you are sending money to a friend, paying someone's rent, or paying a bill at a grocery store, you won't have to pay a single extra penny.
The rule of the government and RBI is clear: there is no charge on Person-to-person (P2P) UPI transactions. This rule is still the same as it has always been.
The Real Thing: The Shopkeeper's Bank Gets Charged
When you make a UPI payment at a big mall or restaurant, after the money hits the shop's bank account, the bank takes a small fee from the shop. This is called MDR (Merchant Discount Rate).
Now banks can increase this MDR a bit (maximum 1.1%). But the thing to note is that this charge is not to be paid by you, but by the shop owner.
If you buy goods worth 1000 rupees, exactly 1000 rupees will be deducted from your phone. The shopkeeper will have to pay the bank's fee from their own margin.
In Which Case Does Money Get Deducted?
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So Where Did This Rumor Come From? (UPI ATM)
All this confusion started because a new feature came recently - UPI ATM.
Earlier, you could only withdraw cash from your own bank's ATM. Now NPCI has made a rule that you can withdraw cash from any bank's ATM using your UPI app (Google Pay, PhonePe).
Banks have announced charges for this feature (just like normal ATM withdrawals charge after a limit). People heard this and mistakenly thought "charges will apply for sending money via UPI."
Withdrawing cash is a different thing, making a payment is different. UPI payment is free.
Can Shopkeepers Ask You for Extra Money?
No. Many small shopkeepers make this excuse and ask for extra money, saying "Brother, if you do UPI, it will cost 10 rupees extra." This is totally illegal.
RBI's rule is that no merchant can recover the MDR charge from you. If anyone says this, you can complain against them or refuse to buy from there. Your job is only to pay the 1000 rupees, the bank's charge is the shopkeeper's headache.
The Government Will Never Charge Common People
Because the government wants people to use digital payments instead of cash. If they put a charge on common people, everyone will go back to using notes (cash). The government always suffers when cash is used (black money increases).
That is why, you will not have to pay any charge for normal UPI payments now or in the future.
Exactly Where and How Much is the Charge?
Withdrawing Cash from UPI ATM (Highest charge is here)
If you go to any ATM and enter your PIN using PhonePe or Google Pay to withdraw physical cash (notes), the bank will charge you for this.
- How much is the charge? This depends on the bank's own rule. Most banks (like SBI, PNB, HDFC) charge ₹15 to ₹25 per transaction.
- When is it free? Just like a normal ATM, it is free 3-5 times a month, after that a charge applies.
Adding Money to UPI Wallet via Credit Card
If you use your Credit Card to add balance to your PhonePe or Paytm wallet (thinking "I don't have cash right now, let me add it via credit card"), then a charge applies to this.
- How much is the charge? Banks charge 1.5% to 2.5% on this + GST.
- Note: If you add money to the wallet directly from a debit card or bank account, even this is free.
Charge for Big Shopkeepers (MDR) - But you don't have to pay it
If you make a payment of more than ₹2000 at a big mall, hotel, or showroom, the bank charges the shopkeeper.
- How much is the charge? Maximum 1.1%.
- Who has to pay it? Only the shopkeeper has to pay this charge. Your bill will be of the exact amount. The shopkeeper cannot ask you for extra money.
The Final Word
If anyone tells you that the government has put a tax on UPI, tell them directly that they don't know the difference between MDR and UPI ATM. Your money is safe and your UPI payment will remain completely free.
Keep making your payments without any tension!
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