1.1% Charge on UPI Transactions

1.1% charge on UPI transactions

Unified Payments Interface (UPI) has revolutionised digital payments in India, making transactions quick, easy, and secure. However, recent developments have led to the introduction of charges on certain UPI transactions. Specifically, some transactions now incur a 1.1% charge. This charge applies under specific conditions, and understanding its implications is essential for users. Let us explore the details of these charges and how they impact UPI transactions.

1.1% charge on UPI transactions above Rs. 2,000

Starting from 1st April 2023, the National Payments Corporation of India (NPCI) introduced a 1.1% charge on certain UPI transactions that exceed Rs. 2,000. This charge is typically applied to payments made through prepaid payment instruments (PPIs) like wallets or credit cards linked to UPI. It is important to note that this charge does not affect regular UPI transactions from one bank account to another bank account. For users making high-value purchases, these additional costs should be considered, especially for business-to-business (B2B) or merchant payments. NPCI aims to promote the seamless functioning of UPI and maintain sustainability by implementing these charges.

Do UPI charges apply to transactions above Rs. 2,000

UPI transactions involving direct transfers between bank accounts do not attract any charges, even if the amount exceeds Rs. 2,000. However, if the payment is routed through PPIs, the 1.1% charge comes into effect for transactions over Rs. 2,000. For instance, paying a merchant using a digital wallet linked to UPI will incur this charge if the transaction amount exceeds Rs. 2,000. This move mainly targets large-value transactions made via PPIs and is designed to share the transaction processing cost between different stakeholders in the digital payment ecosystem.

Are UPI transactions chargeable

Most UPI transactions remain free of charge, especially for peer-to-peer (P2P) and peer-to-merchant (P2M) transactions made directly between bank accounts. The introduction of the 1.1% charge only affects transactions conducted through PPIs when the transaction amount exceeds Rs. 2,000. Users conducting everyday transactions, such as sending money to family or making smaller purchases, will not be affected by these charges. The move is primarily focused on ensuring the operational sustainability of the UPI ecosystem without burdening small-value transactions.

What are the charges for UPI transactions

As per the new guidelines, a 1.1% charge is applied to transactions over Rs. 2,000 when conducted through PPIs. This charge is calculated based on the transaction amount and is applicable to payments made through digital wallets, credit cards, or other PPIs linked to UPI. For example, a transaction of Rs. 2500 through a PPI-linked UPI account will attract a charge of Rs. 27.5. It is important to clarify that no charges are imposed on regular UPI transactions between bank accounts, and the 1.1% charge is limited to specific PPI-related payments.

How to avoid UPI transaction charges

To avoid UPI transaction charges, users should stick to making transactions directly between bank accounts rather than using PPIs. Transactions routed through a UPI-linked bank account remain free, regardless of the transaction amount. Users can also choose other payment methods, such as bank transfers or using a UPI ID linked directly to a bank account, to bypass the 1.1% charge on large transactions. Additionally, staying informed about any changes in the UPI transaction policies and opting for bank-to-bank transfers will help users avoid unnecessary fees.

Conclusion

The introduction of the 1.1% charge on UPI transactions exceeding Rs. 2,000 via PPIs highlights the growing need for sustainable digital payment ecosystems. While most everyday UPI transactions remain free of charge, users should be aware of how this fee may impact larger transactions, particularly those involving PPIs. By understanding how and when these charges apply, users can make informed decisions and continue to enjoy the benefits of UPI without incurring unnecessary costs. Keeping transactions between bank accounts is an effective way to avoid these charges.