The announcement comes a day after the government exempted all UPI payments up to Rs 2,000 and RuPay debit card transactions from any bank charge. (Unsplash)The government on Tuesday announced the merchant discount rate (MDR) regime for UPI transactions, exempting person-to-person payments from the levy irrespective of the transaction amount. This means MDR will essentially be levied on payments to merchants, and that too, on transaction amounts of over Rs 2,000 at the rate of 0.4%, with a few exceptions like payments for essential services and capital market transactions.The announcement comes a day after the government exempted all UPI payments up to Rs 2,000 and RuPay debit card transactions from any bank charge.When do the updated MDR provisions take effect?The finalised MDR framework and threshold structure will be effective from October 15. According to the NPCI, this provides acquiring banks, payment aggregators, fintech applications, and corporate accounting platforms “adequate lead time to update their software engines and billing systems”.How much MDR will be charged on your payments?UPI will continue to remain “completely free for all person-to-person transactions, irrespective of the amount transferred”.Payments to merchants, or person-to-merchant (P2M) transactions, of up to Rs 2,000, will remain free, but payments above this threshold will attract o.4% MDR.For high-value UPI payments to merchants exceeding Rs 75,000, the 0.4% MDR will be capped at Rs 300 per transaction.Payments for essential services like railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat MDR of Rs 5 per transaction, instead of the 0.4% levy.Story continues below this adPayments relating to mutual funds, securities, stockbrokers, and dealers will attract an MDR of 0.02%, capped at Rs 300 per transaction.Small merchants, including street vendors, receiving up to Rs 1 lakh per month through UPI QR codes under the Person-to-Person-Merchant (P2PM) category will not be subjected to MDR. The government didn’t specify the MDR levy beyond the Rs 1 lakh limit.Sukalp Sharma is a Deputy Associate Editor with The Indian Express and writes on a host of subjects and sectors, notably energy and aviation. He has over 16 years of experience in journalism with a body of work spanning areas like politics, development, equity markets, corporates, trade, and economic policy. He considers himself an above-average photographer, which goes well with his love for travel. ... Read MoreAanchal Magazine is a Deputy Associate Editor with The Indian Express, serving as a leading voice on the macroeconomy and fiscal policy. With 15 years of newsroom experience, she is recognized for her ability to decode complex economic data and government policy for a wider audience. Expertise & Focus Areas: Magazine’s reporting is rooted in "fiscal arithmetic" and economic science. Her work provides critical insights into the financial health of the nation, focusing on: Macroeconomic Policy: Detailed tracking of GDP growth, inflation trends, and central bank policy actions. Fiscal Metrics: Analysis of taxation, revenue collection, and government spending. Labour & Society: Reporting on labour trends and the intersection of economic policy with employment. Her expertise lies in interpreting high-frequency economic indicators to explain the broader trajectory of the Indian economy. Personal Interests: Beyond the world of finance and statistics, Aanchal maintains a deep personal interest in the history of her homeland, Kashmir. In her spare time, she reads extensively about the region's culture and traditions and works to map the complex journeys of displacement associated with it. Find all stories by Aanchal Magazine here ... Read More Tags:UPI