UPI Transactions / Will there be tax on UPI payments of more than Rs 2,000? The government has made it clear

Recently, rumours spread on social media that UPI payments above Rs 2000 will be taxed. The Finance Ministry clarified that there is no such plan. Neither GST nor MDR will be levied. The government is committed to promoting digital payments.

UPI Transactions: For the past few days, a rumor had gained momentum on social media, in which it was being claimed that if you make a payment of more than Rs 2000 through UPI, then tax will have to be paid on it. This news had worried everyone from common people to businessmen. But now the government itself has come forward and clarified the situation.

Is there really going to be a tax on UPI?

No, no such tax is going to be imposed.

The Finance Ministry has clarified that the government is not considering imposing any GST or other tax on transactions of more than Rs 2000 through UPI. The ministry has described such viral news as misleading, baseless and completely wrong.

According to the Finance Ministry, at present the government does not have any proposal to impose tax on UPI transactions. This statement comes after reports that the government is planning to bring UPI transactions under the tax net.

What is MDR and what happened to it?

MDR i.e. Merchant Discount Rate is the fee that was charged from the merchant on digital transactions. But from January 2020, the Central Board of Direct Taxes (CBDT) has completely removed MDR on customer to merchant (P2M) transactions done through UPI and RuPay debit cards.

This means that there is no MDR on UPI transactions, and when there is no fee, GST is also not applicable on it.

Strong step towards Digital India

The government has made it clear that its aim is to promote digital transactions, not to discourage people by imposing tax on it. This is the reason why UPI has been continuously made convenient, fast and free. Today UPI is being used not only in India but also in many countries like Singapore, UAE, France, Bhutan and Nepal.

How fast did the use of UPI increase?

You can guess the popularity of UPI transactions from the fact that while its total transaction was Rs 21.3 lakh crore in the financial year 2019-20, it has increased to Rs 260.56 lakh crore by March 2025.

Today most people prefer to make payments by scanning from mobile instead of cash, which has not only increased convenience but has also made transactions more transparent and secure.