Small Merchant UPI Exemption (P2PM): Who Still Pays Zero MDR
Published: 10/9/2026
Category: Payments
Under NPCI's October 2026 rules, small merchants classed as P2PM who receive up to ₹1 lakh a month via UPI QR pay no MDR. Here is what P2PM means, how to check your category and what to do if you grow past the limit.
P2PM stands for person-to-person-merchant: a small merchant, often an individual or a very small shop, that receives UPI payments through a simple QR code. Under NPCI's MDR rules starting 15 October 2026, P2PM merchants receiving up to ₹1 lakh a month through UPI QR pay no MDR on those payments, even on individual payments above ₹2,000.
P2PM vs a regular merchant
| P2PM (small merchant) | Regular P2M merchant |
|---|
| Typical business | Street vendor, small kirana, auto, tailor, tutor | Shops and businesses with larger volumes or full merchant onboarding |
| Monthly UPI via QR covered by the exemption | Up to ₹1 lakh | Not applicable |
| MDR on payments above ₹2,000 | Nil within the limit | 0.4%, capped at ₹300 at ₹75,000+ |
| MDR on payments of ₹2,000 or less | Nil | Nil |
Your category is set by the bank or payment app that issued your QR, based on how your account was onboarded.
How to check your category
- Look at your QR provider's app or merchant dashboard. Some show the account type directly.
- Ask your bank or provider in writing: "Is my UPI QR account classified as P2PM or P2M for the MDR rules from 15 October 2026?"
- Check your monthly UPI receipts. If you regularly receive more than ₹1 lakh a month, plan for the regular merchant rules.
What happens if you grow past ₹1 lakh a month
Growth is good news, and the cost is modest. Above the small-merchant limit, only payments above ₹2,000 attract 0.4%. A shop receiving ₹2 lakh a month where a quarter of the value comes from payments above ₹2,000 would pay roughly 0.4% of ₹50,000, about ₹200 a month. Confirm the exact rules with your provider, because how the limit is measured matters.
Mistakes to avoid
- Splitting one bill into several smaller UPI payments to stay under ₹2,000. It makes reconciliation and GST records messy and may breach your provider's terms.
- Using a personal QR for a growing business. It can conflict with bank terms, mixes personal and business money and makes your accounts harder to defend.
- Ignoring settlement statements. Check deductions monthly so surprises are caught early.
Where BizFlow fits
BizFlow records the payment mode on every bill, so your monthly UPI total and the share above ₹2,000 are visible at a glance. That makes the "am I under the limit?" question a one-minute check. See BillFlow.
Frequently asked questions
Q: What does P2PM mean in UPI?
A: Person-to-person-merchant: a small merchant receiving payments through a basic UPI QR, as classified by their bank or payment provider.
Q: Do P2PM merchants pay the 0.4% UPI MDR?
A: Not on UPI QR receipts up to ₹1 lakh a month, according to NPCI's FAQs for the October 2026 rules.
Q: Who decides whether I am P2PM?
A: Your bank or the payment provider that onboarded your QR. Ask them to confirm your category.
Sources
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