'Neither Tax, Nor Cess': FM Nirmala Sitharaman Slams Opposition Over Misinformation' On UPI MDR

Finance Minister Nirmala Sitharaman has dismissed claims that the public faces fresh financial burdens from Unified Payments Interface (UPI) transactions, clarifying that Merchant Discount Rate (MDR) charges do not apply to payments under Rs 2,000 and will never be passed on to consumers. Addressing the ongoing controversy surrounding digital payment transaction fees, FM emphasized that the levy is neither a government tax nor an extra cost meant for everyday buyers.

"It does not apply to transactions below Rs 2,000. It is neither a tax nor a cess. Funds will not be deposited into Consolidated Fund of India," said FM Sitharaman, adding that the fee structure operates exclusively within the payments ecosystem to sustain infrastructure. "It is a charge levied by service providers to improve the system and provide better service, not for small transactions,'' said Sitharman. Payments between individuals, and the majority of everyday merchant payments, will remain free. 

#WATCH | Chandigarh: On Merchant Discount Rate (MDR) transaction charges for UPI, Union Finance Minister Nirmala Sitharaman says, "It does not apply to transactions below ₹2,000. It is neither a tax nor a cess; the funds will not be deposited into the Consolidated Fund of India. It is a charge levied by service providers to improve the system and provide better service, not for small transactions. Moreover, it is a charge between operators; it will not be passed on to the consumer. The burden does not fall on the customer. I provided a clarification on this very point when the issue was raised during the parliamentary session. Spreading misinformation, fueling debates based on it, and using that narrative to attack the government has become a habit for the opposition. This is wrong; there is an effort to spread misconceptions and mislead the public. The public needs to remain vigilant."

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— ANI (@ANI) September 21, 2026

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An Inter-Operator Charge, Not a Customer Levy

FM Sitharaman underscored the business-to-business nature of the fee mechanism, noting that consumers making retail payments remain entirely insulated from the cost. "Moreover, it is a charge between operators; it will not be passed on to the consumer. The burden does not fall on the customer," she said. The clarity comes amid rumors suggesting that everyday retail payments, from street vendors to neighborhood grocery stores, would attract additional fees under recent regulatory frameworks.

The regulatory guidelines from payment authorities have consistently exempted person-to-person (P2P) transfers and routine retail transactions from consumer-side fees, restricting interchange fees strictly to specific high-value merchant categories using prepaid payment instruments (PPI) such as digital wallets. From Oct. 15, a 0.4% MDR will apply to person-to-merchant UPI payments above Rs 2,000.

The Finance Minister also criticized opposition parties for misrepresenting standard banking infrastructure charges as public taxation, recalling that official clarifications had already been submitted before Parliament. "I provided a clarification on this very point when the issue was raised during the parliamentary session," Sitharaman said. "Spreading misinformation, fueling debates based on it, and using that narrative to attack the government has become a habit for the opposition."

Warning that distorted narratives could harm public trust in India's digital payment revolution, she added: "This is wrong; there is an effort to spread misconceptions and mislead the public. The public needs to remain vigilant." The government continues to maintain that digital payments infrastructure will remain accessible and free of cost for retail shoppers across the country.

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