UPI Transaction Income Tax India 2025

What is UPI?

Unified Payments Interface (UPI) is an instant real-time payment system launched by National Payments Corporation of India (NPCI) that allows users to link multiple bank accounts on a single mobile app and transfer money digitally without sharing bank details. UPI enables peer-to-peer (P2P) and peer-to-merchant (P2M) payments and has become the backbone of India's cashless economy.

UPI Transaction Limit Per Day in 2025

The standard daily UPI transaction limit for 2025, as set by the National Payments Corporation of India (NPCI), is ₹1 lakh. However, NPCI has recently issued a circular that increases these limits for certain categories, effective from 15 September 2025, allowing transactions up to ₹10 lakh per day. Below is a summary of these changes:

Here are the UPI transaction limits per day for different banks:

UPI Transaction Limit Per Week and Month

In addition to daily limits, some banks set a weekly UPI transaction limit, which varies from bank to bank within the UPI network. This weekly cap is designed to help manage overall payment volumes and reduce the risk of fraud or misuse.

Similarly, a monthly UPI transaction limit has been introduced by certain public sector and private sector banks. This monthly cap also differs across banks, aiming to provide an additional layer of control while facilitating convenient digital payments for individuals and businesses.

UPI Transaction Charges

UPI transactions for personal payments remain free of any extra charges. Individuals making payments via UPI do not incur transaction fees, making it an attractive payment method.

However, for transactions involving digital wallets (Prepaid Payment Instruments or PPIs), payments exceeding ₹2,000 attract charges. The charge, called an interchange fee, is paid by merchants, not customers.

Surcharge/Interchange Fee on UPI Payments via PPI

When UPI payments are made through PPIs such as wallets (e.g., PhonePe, Paytm), interchange fees are applied to cover processing, authorization, and other transaction-related costs. This fee is similar in nature to the merchant discount rate applicable to credit card payments.

The interchange fee rate ranges between 0.5% and 1.1%, depending on the merchant category:

• Fuel payments: 0.5%
• Utilities, telecom, education, agriculture, post office: 0.7%
• Supermarkets: 0.9%
• Insurance, mutual funds, railways, government services: 1%

Who Pays the Interchange Fees?

The merchant's bank or wallet provider pays the interchange fee to the payer's bank for processing the transaction. Small retailers are typically unaffected, as these fees apply only to larger merchant wallet transactions above ₹2,000.

Medium and large merchants may either absorb this cost or pass it on to customers indirectly through pricing. Additionally, wallet issuers like PhonePe and Paytm are required by NPCI to pay a 0.15% service charge to banks when a wallet is loaded with more than ₹2,000.

Do Customers Pay Interchange Fees?

Customers do not pay interchange fees for UPI payments made via wallets for Peer to Peer (P2P) or Peer to Merchant (P2M) transactions. The fees are settled between banks and service providers behind the scenes.

What is a Prepaid Payment Instrument (PPI) in UPI?

PPIs refer to digital wallets and payment instruments that allow users to preload money and make payments online in real-time. Examples include wallets like PhonePe, Paytm, Amazon Pay, Freecharge, and others, as well as prepaid cards and vouchers.

Payments made using PPIs typically involve scanning a UPI QR code and completing the transaction without directly using bank accounts.

Updated UPI Operational Guidelines (Effective August 1, 2025)

To improve payment system efficiency and security, the NPCI implemented new rules across all UPI apps, including Google Pay, PhonePe, Paytm, and BHIM:

• Balance Check Limit: Users can check their bank balance up to 50 times per day per UPI app. Exceeding this limit blocks further balance checks for 24 hours.
• Auto-Balance Display: After every successful UPI transaction, the remaining account balance is automatically displayed.
• Account Linking Limit: Up to 25 bank accounts can be linked per day per UPI app using the same mobile number or account fetching method.
• Transaction Status Checks: Pending transaction status can be checked up to 3 times per transaction, with a mandatory 90-second gap between attempts.
• Auto-Debit Processing Time: Mandates for auto-debit payments such as EMIs, SIPs, and subscriptions will only be processed during non-peak hours (before 10:00 a.m. and after 9:30 p.m.).
• Payee Name Display: UPI apps must display the payee's registered bank name before completing any transfer, enhancing transparency and reducing fraud.