No extra charge on digital payments via UPI, RuPay from January 1, 2020

The central government amended two acts, Payments and Settlement Systems Act and the Income Tax Act.

Created On: Dec 30, 2019 14:24 ISTModified On: Dec 30, 2019 14:31 IST
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The central government has decided to remove the Merchant Discount Rate (MDR) to promote digital payments. Finance Minister Nirmala Sitharaman recently said that all digital transactions using RuPay or UPI will not face additional charges from January 1, 2020.

Earlier, the central government amended two acts, Payments and Settlement Systems Act and the Income Tax Act. Now, the Department of Revenue (DoR) will notify UPI and RuPay as the approved mode of payment for digital transactions without any Merchant Discount Rate (MDR).

What is MDR?

•         When a person swaps his card at a shop, the fee that the shopkeeper has to pay to his service provider is called MDR Charge. The MDR charges can range from 0% to 2% of the transaction amount.
•         MDR charge also has to be paid for online transactions based on QR Code.
•         The amount paid by the shopkeeper on every transaction is divided into three parts – Bank, Point of Sale (PoS) and third part goes to VISA or MasterCard companies.
•         The MDR charge on credit cards can be up to 2% of the transaction amount even after the announcement by Finance Minister.

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This step will promote home-grown digital payment gateways, RuPay and UPI. Other foreign payment gateway companies are VISA and MasterCard. It will also reduce the transaction cost of digital payments as well as it will enhance the use of digital payment in India. This recent move by Finance Minister can play a major role to boost the digital economy of India.

E-Auction Platform

The Finance Minister also launched the common e-auction platform. The government will put information about the property of defaulters on this platform. The government has already uploaded information of about 35,000 properties on this platform. The total value of these assets is around 2.3 lakh crores.

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