Merchant Discount Rate (MDR)

Tax Glossary Definition

Merchant Discount Rate (MDR)

Refers to the fee imposed by acquiring banks or payment service providers on merchants for processing customer payments made through debit or credit cards. The charge covers transaction handling, network, and administrative costs, and is treated as an allowable business expense under tax laws. Example: If a retailer incurs ₹1,000 as MDR on total card transactions of ₹1 lakh, the amount qualifies as a deductible business expense.

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