Budget 2026 has announced a Rs2,000 crore allocation to support low-value digital payments on Unified Payments Interface (UPI) and RuPay, alongside a sharp scale-up of India’s open e-commerce network, the Open Network for Digital Commerce (ONDC), which has crossed 350 million transactions.
Together, the measures are intended to expand digital payment acceptance among small merchants and widen digital marketplace access for micro, small and medium enterprises (MSMEs).
Rs 2,000 crore to sustain zero-MDR digital payments
The Budget provides Rs2,000 crore to subsidise low-value digital transactions of less than Rs 2,000 made through UPI and RuPay.
The subsidy is designed to continue the zero merchant discount rate (MDR) regime for small merchants by covering acquiring and processing charges that would otherwise be borne by sellers. This applies primarily to kirana stores, street vendors and small digital sellers that depend on QR-based payment acceptance.
Government data cited in Budget documents shows that India processed around 16.9 billion UPI transactions in December 2025, with a total transaction value of about Rs 23 lakh crore.
In addition to the UPI subsidy, the Budget earmarks Rs 1,000 crore to support RuPay credit card acceptance and point-of-sale expansion in tier-II and tier-III cities. The objective is to expand acceptance of RuPay debit and credit payments, including QR-based acceptance that does not require merchants to invest in physical POS terminals.
ONDC scales to 350 million transactions
The Budget also highlighted the expansion of ONDC to 350 million cumulative transactions.
The network now operates in more than 600 cities and has around 3.5 lakh registered sellers across categories such as grocery, fashion, handicrafts and services.
ONDC enables sellers to be discovered across multiple buyer applications rather than being restricted to a single marketplace. Buyer applications on the network include platforms operated by PhonePe and Paytm.
Logistics services on the network are integrated through partners such as Delhivery and Ecom Express, while payments are settled through UPI-linked systems. According to the Budget, the network provides a common digital infrastructure layer for seller discovery, ordering, logistics and payments.
E-commerce TCS moved to a flat 2 percent
Budget 2026 has rationalised tax collected at source (TCS) on e-commerce transactions to a flat 2 percent. The revised rate applies across consumer and business-to-business digital marketplaces, including transactions routed through ONDC and platforms such as IndiaMART and Udaan.
Earlier, sellers operating on multiple platforms were subject to TCS deductions at different stages of transaction flows, which created reconciliation and cash-flow challenges. The single rate is intended to simplify compliance for marketplace sellers.
Combined impact on MSME digital commerce
With zero-MDR support for low-value digital payments, expanded RuPay acceptance and a scaled open-network commerce layer through ONDC, Budget 2026 places payment acceptance and marketplace access at the centre of MSME digitisation.
Small retailers and service providers can continue to accept UPI and RuPay payments without transaction charges for sub-Rs 2,000 tickets, while MSME sellers using ONDC gain access to a multi-app discovery model supported by integrated logistics and payments.
The combination of the UPI subsidy, ONDC expansion and a uniform TCS structure forms the core digital commerce and payments framework for MSMEs under Budget 2026.