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UPI Transaction Charges: How much Digital Payments Cost You?

UPI Transaction Charges_ How much Digital Payments Cost You
UPI Transaction Charges_ How much Digital Payments Cost You

The introduction of the Unified Payment Interface (UPI), launched by the National Payments Corporation of India (NCI), transformed how transactions happen in India. The UPI technology allows users to transfer money to people, merchants, and banks with a simple tap on their mobile phones.


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Online payments became the norm after instant bank-to-bank payments on UPI apps. In India, UPI payments quickly became the favorite mode of payment for large and small transactions. In this blog, we delve more into the world of UPI and give you a detailed overview of UPI transaction charges and fees.

UPI – Prepaid Payment Instrument (PPI) 

UPI – Prepaid Payment Instrument (PPI)
UPI – Prepaid Payment Instrument (PPI)

Prepaid Payment Instrument refers to digital wallets where users can store their money to make instant real-time payments. Different PPIs currently used are digital wallets, preloaded gift cards, smart cards, digital vouchers, and magnetized chips.

The most commonly used PPI is the digital wallet enabled by apps like PhonePe, Paytm, Amazon Pay, etc. SODEXO vouchers and Freecharge wallets also enable wallet payments. To initiate payment through the wallet, you only have to scan the UPI QR code using the built-in QR code scanner in these digital wallet apps.

The PPIs enable users to send and receive money without physical cash or a card. As long as your UPI is linked to your bank account, you can make UPI payments without loading your digital wallet. You can also use PPIs without linking your UPI bank account and send and receive money through digital wallets.

The idea of cashless transactions and freedom from carrying cards or cash makes PPIs more appealing to customers. The newer payment modes make it possible to pay for anything from anywhere without carrying a physical wallet. As all online transactions are automatically electronically authorized, the exposure of card numbers and fraud is significantly reduced. It also helps merchants get instant payments, thus making it possible for their business to flourish.

Starting from April 2023, NPCI has also authorized NRIs with international mobile numbers to link their NRE and NRO bank accounts with UPI to enjoy seamless transactions. Now, sending money to friends and family in India and abroad will be hassle-free.

What are UPI’s Transfer Limits?

While UPI payments are fast, convenient, and easy, there is a limit to the amount and number of transactions you are allowed to make daily. As per NPCI, the maximum UPI transaction limit is Rs. 1 lakh daily. Educational institutions and healthcare facilities are provided a limit of Rs. 5 lakh per day.

The bank-to-bank transfer limit varies from Rs. 25,000 to Rs. 1 lakh based on the bank account linked with your UPI. The UPI transfer limit is set daily or monthly, depending on the bank. 

UPI New Regulations

Starting from April 1, 2023, merchants who receive payments from customers via PPI wallets on UPI must pay intercharge fee of 1.1% for transactions exceeding Rs. 2000. Customers can continue to pay merchants using any UPI app without any charge. No fees are involved for customers making bank transfers or UPI payments.


UPI Fees

The PPIs enable UPI payments and are the most common payment methods. As the PPIs offer UPI services, interchange fees are applicable. This interchange fee is usually associated with card payments. The interchange fee covers processing, accepting, and authorization costs. You can compare interchange fees to merchant discount rates, which are common when using credit cards. Payment service providers and banks use this fee to generate an additional revenue stream. 

For UPI transactions, merchants pay the interchange fee to allow customers to pay through UPI. For example, if you pay a merchant through Paytm using a QR code, the merchant who receives the payment will pay the interchange fee to Paytm. The interchange fee depends on the payment service provider and the type of service. The fee is usually 0.5% to 1.1% of the transaction amount. The interchange fee is shown below:

UPI Fees - Table