Will new MDR rules affect salary payments via UPI?
What's the story
The Indian government's recent clarification on the applicability of Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions has left many employers and households wondering. The Ministry of Finance had earlier announced that MDR will be applicable only to certain Person-to-Merchant (P2M) transactions above ₹2,000. But what does this mean for wage or salary payments made through UPI?
Transaction types
What the government's clarification means
As per the government's clarification, UPI will remain free for Person-to-Person (P2P) transactions, irrespective of the amount. However, MDR will be applicable to certain P2M transactions above ₹2,000.
This distinction is important as it could affect how employers and households use UPI for salary or wage payments.
Mayank Parashar, Associate at Clasis Law, explained that if a payment is made directly by an employer to an individual employee as a P2P transaction, then MDR charge should not apply.