Online Payments for Your Store: UPI, Gateway or COD

Most Indian online stores should offer two things: cash on delivery or pay at pickup, because many customers still expect it, and an online option through a payment gateway, so orders are paid before they ship. A UPI ID or QR shared in chat works when you have few orders, but you'll have to check every payment by hand as you grow.

Here's how each option works, what it costs, and what to set up first.

Your three options

UPI: simple, with a catch at volume

Sharing a UPI ID or QR is the easiest start. The customer pays from any UPI app and the money reaches your bank account. The catch isn't the payment, it's the checking. Someone has to confirm that ₹1,240 came in, match it to the right order and then release the goods. A screenshot isn't proof of payment, so always confirm in your bank app.

About UPI charges. Merchant charges on UPI changed recently, so old advice saying UPI is always free for merchants is out of date. According to the Finance Ministry's FAQ:

• From 15 October 2026, a charge of 0.4% applies to person-to-merchant payments above ₹2,000, capped at ₹300 for payments of ₹75,000 and above.
• Payments up to ₹2,000 are not affected.
• Small merchants on person-to-merchant UPI who receive up to ₹1 lakh a month stay at zero, and don't need GST registration for this.

Ask your bank or payment provider how this applies to your account, as it can depend on how you're set up.

Payment gateways: paid before you ship

A payment gateway lets a customer pay on your store with the methods it supports, such as UPI, cards and net banking. Razorpay, Cashfree, PhonePe and PayU are some of the names you'll come across in India.

What to compare before signing up:

1. Rates for each payment type. They often differ, so check the full rate card and any GST on fees.
2. Settlement time. How many days until the money reaches your bank? RBI's rules require non-bank aggregators to keep merchant funds in escrow and settle to your account, with the timing set by your agreement, so read that part.
3. Documents. Usually PAN, bank details and business proof. Your store needs clear policies too.
4. Your own account. Check that the money settles directly to your bank in your name.
5. Refunds. How are refunds made, and does the fee come back?
6. Compatibility. Check that your store platform connects to this gateway.

Test before you go live. Place a real low-value order, refund it, then check the amount in your bank and on the order. Do it once and you'll catch most problems before a customer does.

Cash on delivery: expected, but not free

COD can bring orders from customers who don't yet trust a new store. But compare the costs before you offer it everywhere:

• Refused orders. You pay for delivery and often for the return, and your stock is stuck in transit.
• Courier charges. Many couriers add a COD fee. Check your rate card.
• Slower cash. Couriers remit COD collections on a cycle, not instantly.
• Cash handling. With your own delivery staff, someone has to reconcile cash every day.

How to reduce refused orders:

1. Confirm the customer's phone number before accepting the order.
2. Send a confirmation message with items, total and delivery date.
3. Set a maximum value for COD orders.
4. Add a small COD fee or offer a discount for paying online. Be clear about it at checkout.
5. Limit COD to the PIN codes where you've seen it work.
6. Take a part payment upfront on high-value orders.

Which should you offer first?

Recording payments properly

Collecting the money is half the job. It also has to be recorded correctly, or your books and your dues list stop being reliable. Every payment should be matched to an invoice, whatever the method, with part payments and refunds recorded too. This matters most for COD, where the money comes in days after the sale.

How this works on KhataBhai

On a KhataBhai store: Customers pay you on delivery or at pickup. To take payment online at checkout, connect your own payment gateway account.

You can also control cash on delivery, with a minimum or maximum order value, an extra fee, the PIN codes it's available for and the delivery methods it works with.

When customers pay on delivery or at pickup, the cash or UPI comes straight to you, and you record it against the invoice. Your invoices can also show a UPI QR code carrying the amount owed. Turn on Show UPI QR code in your invoice settings, after adding your UPI ID.

Because a store order only becomes an invoice when it's accepted, stock and dues stay correct whichever way the customer pays. See how store orders work.

Frequently asked questions

Do I need a current account for a payment gateway?

Requirements vary by provider and business type. Ask your gateway, and check that the account name matches your business documents.

Is a UPI payment screenshot enough proof?

No. Screenshots can be edited. Confirm the amount in your bank or UPI app before releasing the goods.

Should I charge extra for cash on delivery?

Many sellers do, because COD costs more to fulfil. Show it clearly before the customer places the order so it isn't a surprise.

Can I take part payment in advance?

Yes, that's common for high-value or custom items. Agree the amount clearly, and record the advance against the customer so it's adjusted on the invoice. Then read our guide to starting an online store for the rest of the setup.