How to Avoid MDR on Rent Payments: A Guide for PG Owners

From 15 October 2026, most UPI rent payments above ₹2,000 will cost PG, hostel and co-living owners 0.4% + GST on every payment. Almost every monthly rent payment is above ₹2,000, so this new charge, called MDR, will apply to the majority of rent collected through UPI.

The good news is that there are simple, fully legal ways to avoid or reduce it. Rent collected through UPI AutoPay mandates carries no MDR, regardless of the amount, and RentOk offers several other low-cost and free ways for tenants to pay.

This guide explains what MDR is, how much it will cost a typical PG, whether it can be passed on to tenants, and the practical ways to avoid or reduce it.

What is MDR, and what changes from 15 October 2026?

MDR, or merchant discount rate, is a fee a business pays for accepting digital payments. It has applied to card payments for years, but UPI payments to businesses have been free until now.

On 15 September 2026, NPCI issued a circular introducing MDR on selected person-to-merchant (P2M) UPI payments, effective 15 October 2026. The key rules are:

Payment type	MDR from 15 October 2026
UPI payments to a business, up to ₹2,000	Nil
UPI payments to a business, above ₹2,000	0.4% of the amount
UPI payments to a business, ₹75,000 and above	Capped at ₹300 per payment
UPI AutoPay and recurring mandates	Nil, at any amount
Person-to-person UPI transfers	Nil
Small merchants receiving up to ₹1 lakh a month through UPI QR	Nil

The charge is paid by the business, not the person paying. For a PG owner, that means MDR is deducted from the rent you receive, and the amount settled to your account will be slightly lower than the rent the tenant paid.

How much will MDR cost a PG owner?

On a single payment, 0.4% looks small. Across every tenant, every month, it adds up quickly. The table below shows the cost if all rent is collected through regular UPI payments (QR codes or payment links).

Property size	Average monthly rent	Monthly rent collected	MDR per month	MDR per year
20 beds	₹8,000	₹1,60,000	₹640	₹7,680
50 beds	₹9,000	₹4,50,000	₹1,800	₹21,600
100 beds	₹10,000	₹10,00,000	₹4,000	₹48,000
300 beds	₹10,000	₹30,00,000	₹12,000	₹1,44,000

For an operator with 100 beds, that is nearly ₹50,000 a year in charges that did not exist before. These figures are 0.4% before GST. With 18% GST on the fee, a single UPI payment of ₹10,000 costs the owner about ₹47. Larger security deposits paid through UPI attract the same 0.4%, up to the ₹300 cap per payment.

Can you pass MDR on to your tenants?

No. NPCI has stated that merchants cannot pass MDR on to customers, who pay only the posted price. Adding a “UPI charge” or surcharge to a tenant’s bill for paying through UPI is therefore not allowed.

This means the cost stays with the owner unless the payment is made in a way that does not attract MDR in the first place. That is why the method of collection matters more than ever.

How to avoid MDR on rent payments

1. Collect rent through UPI AutoPay (the most effective option).

The Department of Financial Services has confirmed that automated recurring payments, known as UPI Mandates or AutoPay, do not carry the prescribed MDR. This applies to any amount. As a result, AutoPay is a natural fit for rent, because rent is a fixed, recurring monthly payment, exactly the kind of payment mandates exist for.

With AutoPay, the tenant approves a mandate once in their UPI app, and RentOk then debits the rent automatically each month on a fixed date. If a debit fails, RentOk retries it, so the owner no longer needs to chase payments.

What’s more, on RentOk, an AutoPay payment costs a flat ₹15, compared with about ₹47 for a regular UPI payment of ₹10,000. RentOk has negotiated this rate with its banking partners and keeps no margin on it.

2. Use e-NACH for higher rents

For monthly dues above ₹15,000, a bank-account mandate through e-NACH (auto bank debit) is a practical alternative. e-NACH runs on the National Automated Clearing House rather than on UPI, so the new UPI MDR framework does not apply to it. Just like AutoPay, the tenant approves it once, RentOk collects payments automatically, and the fee is ₹15 per payment.

3. Pay with a RuPay debit card.

Payments made with a RuPay debit card carry no charge at all, so the owner receives the full rent. Tenants might have a RuPay debit card from their bank.

4. Pay through a personal virtual account.

On RentOk, every tenant gets a personal virtual account. Tenants, or their parents, can pay by IMPS, NEFT or RTGS, and the money lands in the owner’s bank account, automatically marked as paid against the right tenant. Because these are bank transfers rather than UPI payments, they cost ₹15 per payment on RentOk instead of the UPI rate.

5. Pay in split, in parts of ₹2,000.

UPI payments of ₹2,000 or less carry no MDR. Tenants can pay their rent in parts of up to ₹2,000 each, free of charge, and RentOk records them as a single entry in the owner’s passbook.

6. Check whether you qualify as a small merchant.

Small merchants receiving up to ₹1 lakh a month through UPI QR into their bank account continue to pay zero MDR, regardless of the size of individual payments. This may help very small PGs, but most properties with more than about ten beds will cross the limit. Confirm your classification with your bank.

Compare the fee on each payment mode.

The more tenants who use the lower-cost modes, the more of the rent reaches you. The examples below are for rent of ₹10,000 collected through RentOk.

Payment mode	Fee on ₹10,000 rent
Regular UPI (QR code or payment link)	About ₹47
UPI AutoPay	₹15
e-NACH (auto bank debit)	₹15
Personal virtual account (IMPS, NEFT, RTGS)	₹15
RuPay debit card	₹0
Pay in split parts of ₹2,000	₹0

What does not work

• Adding a surcharge to tenants who pay by UPI. As covered above, the rules do not allow merchants to pass MDR on to customers.
• Going back to cash. It avoids MDR but brings back the problems digital payments solved: no automatic records, more handling, delays and disputes. On top of that, tenants pay ATM charges of ₹20 or more once they use up their free withdrawals.

How to move your tenants to AutoPay on RentOk

RentOk AutoPay supports both UPI AutoPay (for dues up to ₹15,000) and e-NACH (for dues above ₹15,000), so every tenant can be How to move your tenants to AutoPay on RentOk

RentOk AutoPay supports both UPI AutoPay (for dues up to ₹15,000) and e-NACH (for dues above ₹15,000), so you can cover every tenant.

1. Turn on AutoPay for your property. In the RentOk Manager app, open Dues & Payment Settings and tap Enable AutoPay. Choose whether AutoPay is mandatory and which tenants are eligible, then save.
2. Send reminders to all tenants in one tap. RentOk sends each tenant a link to set up AutoPay, so you don’t have to follow up individually.
3. Tenants approve once. Each tenant picks what AutoPay should cover (all dues or rent only), chooses a date, and approves in PhonePe, Google Pay, Paytm, BHIM or through their bank account.
4. RentOk collects rent automatically every month. It notifies tenants 24 hours before each debit, marks payments as paid, and sends receipts automatically.

Meanwhile, new tenants can set up AutoPay during online check-in, so they start on AutoPay from their first month. For a complete walkthrough, read our guide to RentOk AutoPay.

Switch before 15 October

MDR will apply to regular UPI rent payments from 15 October 2026, and the cost cannot be passed on to tenants. Moving your tenants to AutoPay is the simplest way to keep receiving your full rent, while also ending the monthly cycle of reminders and follow-ups.

If you already use RentOk, turn on AutoPay in the Manager app today and send reminders to all your tenants in one tap. New to RentOk? Visit the RentOk AutoPay page to book a demo.