High-value UPI payments for jewellery and other  purchases will attract a 0.4% Merchant Discount Rate (MDR) from October 15, 2026, under the revised framework notified by the National Payments Corporation of India (NPCI). The charge will apply to eligible Person-to-Merchant (P2M) UPI transactions above Rs. 2,000, with the MDR capped at ₹300 per transaction for payments of Rs. 75,000 and above.

The new UPI MDR framework will come into effect from October 15, 2026.

The revised framework marks a change in the existing zero-MDR structure for select higher-value merchant transactions, while keeping UPI payments free for consumers. The MDR will be borne by the merchant and cannot be directly passed on to customers as a transaction or platform fee.

Impact on Jewellery Transactions

For jewellery retailers, the new framework will be particularly relevant because jewellery purchases frequently involve higher-value digital payments.

For example, on a Rs. 1 lakh jewellery purchase, a 0.4% MDR would amount to Rs. 400. However, since the revised framework caps the charge at Rs. 300, the maximum MDR payable by the merchant on that transaction would be Rs. 300.

Similarly, a ₹50,000 eligible UPI transaction would attract an MDR of Rs. 200, while transactions of ₹75,000 and above would attract the maximum Rs. 300 charge.

Consumers Will Not Pay the MDR

The revised framework does not introduce a UPI transaction fee for consumers. Person-to-person (P2P) transactions will remain free, while P2M transactions up to Rs. 2,000 will also remain outside the MDR framework.

The government has also clarified that individuals cannot be charged a transaction fee, platform fee or other direct or indirect fee for using UPI. This means jewellery customers making eligible high-value payments will not be required to pay an additional UPI surcharge.

Small Jewellers and Micro-Merchants Remain Exempt

Small merchants operating under the Person-to-Person Merchant (P2PM) framework will continue to receive zero-MDR treatment. The category covers small vendors receiving up to Rs. 1 lakh per month through UPI QR payments directly into their bank accounts.

This provision is expected to keep everyday digital payments for small retailers and micro-businesses outside the new MDR structure.

Only a Limited Share of UPI Merchant Transactions Affected

According to the Finance Ministry, the revised MDR will affect only around 4% of merchant transactions, as the majority either fall below the ₹2,000 threshold or qualify for the zero-MDR P2PM framework. Transactions up to ₹2,000 account for more than 95% of UPI P2M transactions by volume.

The new framework is intended to establish a sustainable revenue mechanism for the UPI ecosystem and support continued investment in digital infrastructure, cybersecurity, innovation and customer service. NPCI has also said that 5% of the MDR collected will be allocated to a dedicated fund for small merchants.

A New Cost Consideration for Jewellery Retailers

With jewellery sales increasingly relying on digital payments, the revised MDR introduces a new payment-processing cost for eligible high-value transactions. While the Rs. 300 cap limits the impact on larger purchases, jewellery retailers will need to account for the charge as part of their payment and transaction costs from October 15.

The revised framework therefore brings a new consideration for the jewellery trade at a time when retailers are entering the important festive and wedding shopping season.