Decoding Payment Gateway Charges in India: A Small Business Guide (2026)

By WovLab Team | April 17, 2026 | 3 min read

Understanding the Fee Structure: MDR, TDR, and Hidden Costs

For any small business operating online in India, navigating the world of digital payments is crucial. The first step is to demystify the associated costs. When you start accepting payments, you'll frequently encounter terms like MDR and TDR. Understanding these is fundamental to managing your payment gateway charges in India for small business operations effectively. At its core, the fee you pay on every single transaction is a percentage, and this is where the jargon begins.

The Merchant Discount Rate (MDR), often used interchangeably with Transaction Discount Rate (TDR), is the comprehensive fee a business pays to its payment processor for each sale. This isn't a single fee but a bundle of costs. It includes:

• Acquirer Bank Fee: The largest portion, this goes to the bank that processes the transaction on your behalf (your payment gateway's partner bank).
• Issuing Bank Fee: A fee paid to the customer's bank for authorising the transaction.
• Card Network Fee: A small percentage that goes to the card networks like Visa, Mastercard, or our own RuPay for using their infrastructure.
• Payment Gateway Commission: This is the slice your payment gateway provider (like Razorpay or Stripe) takes for providing the technology, platform, and support.

For example, if your TDR is 1.9% and a customer buys a product for ₹1,000, you will pay ₹19 + GST as the transaction fee. The final amount credited to your account would be approximately ₹977.58. But beware of hidden costs that aren't part of the TDR, such as fees for failed transactions, currency conversion charges for international payments, and hefty chargeback penalties which can range from ₹500 to ₹750 per dispute.

Expert Insight: Always read the fine print. A low headline TDR can be attractive, but high ancillary fees for chargebacks, settlements, or customer support can significantly increase your total cost of accepting payments.

2026 Comparison of Payment Gateway Charges in India for Small Business

The Indian payment gateway market is fiercely competitive, which is great news for businesses. However, comparing providers requires looking beyond the headline rate. Each gateway has a different pricing structure for various payment modes. As of 2026, the landscape has matured, with four major players catering to small and medium businesses: Razorpay, PayU, Stripe, and Instamojo. Below is a detailed comparison of their standard charges for new businesses without any negotiated volume discounts. Remember that Goods and Services Tax (GST) at 18% is applicable on all fees.