Cash on Delivery in India: What COD Really Costs and How to Offer It Safely
A ₹899 kurti sent COD costs ₹123 to deliver and ₹142 if it comes back unsold. Here is the arithmetic, and how to keep COD without paying for fake orders.
In this post · 7 sections
Ayesha sells hand-embroidered chikankari kurtis from Lucknow at ₹899 each. Six of every ten buyers choose cash on delivery. On paper each COD order is a ₹899 sale. In practice a delivered COD order costs her ₹123 in courier charges before GST, and a COD order the buyer refuses costs ₹142 and brings back a kurti she has to re-pack and re-list.
So should an Indian online store offer cash on delivery? For most small sellers, yes: many buyers will not pay upfront to a brand they have just found on Instagram. But COD is not free money. It carries a courier COD fee, return-to-origin (RTO) freight in both directions, and a cash delay of about eight working days. Price those in, put limits on COD, and confirm risky orders before they ship, and COD stays profitable.
Key takeaways
- A courier COD fee is a fixed amount or a percentage of order value, whichever is higher. On Shiprocket's Lite plan with Delhivery Surface that is ₹52 or 3.3%, so every COD order below about ₹1,576 pays the flat ₹52.
- A refused COD parcel costs forward and return freight, and Shiprocket reverses the COD fee. A 0.5 kg Zone D refusal costs ₹142 before GST, for no sale.
- Turning COD off only pays if most COD buyers switch to prepaid. In the worked example below, 41 of 60 COD buyers (68%) would have to pay online just to break even.
- The levers that work: a COD order limit, a small COD fee, a confirmation call or message before dispatch, fast action on failed deliveries, and a reason to pay online.
- COD cash reaches you later. Shiprocket remits COD on a D+8 working-day cycle, so roughly two weeks of COD sales are always in transit.
What does cash on delivery cost an online seller in India?
Three charges sit on every COD order that a prepaid order does not carry in the same way.
- The COD fee. Shiprocket's COD charges article says the fee is a fixed COD charge or a percentage of the order value, whichever is higher. For Delhivery Surface on the free Lite plan, Shiprocket's rate card listed ₹52 or 3.3% when we read it on 19 October 2026.
- RTO freight. If the buyer refuses or cannot be reached, the parcel comes back and you pay freight for the return trip. On the same rate card, RTO for the first 0.5 kg is priced the same as forward freight.
- Waiting for your money. Prepaid money settles to you within days. COD cash is collected by the courier and remitted later.
Compare that with a prepaid order. Razorpay's pricing page lists a standard fee of 2% per successful domestic transaction, including UPI, plus 18% GST on that fee. On a ₹899 kurti that is ₹17.98 plus ₹3.24 GST, or ₹21.22.
Worked example: one ₹899 kurti, 0.5 kg, Zone D
Ayesha's parcels weigh under 0.5 kg in a mailer, and most travel outside Uttar Pradesh, which Shiprocket bills as Zone D (rest of India). Delhivery Surface on Lite charges ₹71 for the first 0.5 kg to Zone D. Courier figures are before GST; the Razorpay figure includes GST on the fee.
| Outcome | Freight | COD fee | Gateway fee | Total cost | Sale? |
|---|---|---|---|---|---|
| Prepaid, delivered | ₹71 | ₹0 | ₹21.22 | ₹92.22 | Yes |
| COD, delivered | ₹71 | ₹52 | ₹0 | ₹123.00 | Yes |
| COD, refused (RTO) | ₹71 out + ₹71 back | ₹0 (reversed) | ₹0 | ₹142.00 | No |
The fixed fee is what makes COD expensive on low-value orders. ₹52 is 5.8% of an ₹899 kurti. The 3.3% rate only takes over at ₹52 ÷ 0.033 = ₹1,576, so below that every COD order pays the full ₹52. Shiprocket's passbook explainer confirms the COD fee is reversed when a shipment goes RTO, which is why the refused row shows ₹0 for it.
How much does RTO add across a month?
One order tells you little. Take Ayesha's month: 100 orders, 40 prepaid and 60 COD. Say 1 in 5 COD orders comes back. That is an example, not an industry benchmark; your own RTO rate is in your courier or aggregator dashboard. Assume each kurti costs her ₹400 to make, so a delivered order earns ₹499 before shipping and fees.
| Line | 20% COD RTO | 10% COD RTO |
|---|---|---|
| Prepaid delivered (40 × ₹92.22) | ₹3,688.80 | ₹3,688.80 |
| COD delivered | 48 × ₹123 = ₹5,904 | 54 × ₹123 = ₹6,642 |
| COD refused | 12 × ₹142 = ₹1,704 | 6 × ₹142 = ₹852 |
| Total shipping and fees | ₹11,296.80 | ₹11,182.80 |
| Delivered orders | 88 | 94 |
| Cost per delivered order | ₹128.37 | ₹118.97 |
| Margin (delivered × ₹499 − costs) | ₹32,615.20 | ₹35,723.20 |
Halving the RTO rate is worth ₹3,108 a month to her, and six more happy customers. It does not show up as a saving on any one invoice, which is why so many sellers never measure it. The table also leaves out the re-packing time, damaged returns and the stock that sat in transit for a week instead of being sold to someone else.
Should you turn COD off?
Usually not, and the arithmetic shows why. If Ayesha switched COD off, her 40 prepaid buyers stay and some of the 60 COD buyers pay online instead. The rest leave. A prepaid order earns her ₹499 − ₹92.22 = ₹406.78.
- To match the ₹32,615.20 she earns with COD on, she needs ₹32,615.20 ÷ ₹406.78 = 80.2, so 81 prepaid orders.
- She already has 40, so 41 of her 60 COD buyers, or 68%, would have to switch to paying online.
- If fewer than that switch, COD-off makes her poorer, even though every remaining order is cheaper to ship.
Run the same sum with your own numbers. Turning COD off makes sense if your RTO rate is very high, your products are expensive or fragile, or your buyers are mostly repeat customers who already trust you. For a new brand selling sub-₹1,500 products to first-time buyers, it rarely does. The better move is to keep COD and make it harder to abuse.
Why do COD orders get refused?
A refused COD parcel is rarely fraud in the dramatic sense. The common causes are ordinary:
- Impulse orders. COD costs the buyer nothing to place, so some orders are a maybe, not a yes. By the time the parcel arrives, the mood has passed or they bought elsewhere.
- Unreachable buyers. Wrong phone numbers, incomplete addresses and buyers who do not pick up the delivery call.
- Slow delivery. The longer a parcel takes, the more time a buyer has to change their mind.
- No cash on hand. The buyer meant to pay but has no change when the courier arrives.
- Genuinely fake orders. Pranks, competitors, or someone testing your store. These exist, but they are usually a smaller share than the first four.
When a courier cannot deliver, Shiprocket raises a non-delivery report (NDR). Its support page lists three responses: reattempt delivery, contact the buyer to fix the problem, or start the return to origin. Each of the tactics below aims at one of those causes.
How to offer COD without losing money
1. Put a ceiling on COD orders
A refused ₹4,500 order ties up more stock and carries a bigger COD fee (3.3% of ₹4,500 is ₹148.50) than a refused ₹899 one. Many sellers allow COD only below a set order value and ask for prepaid above it. Start with a ceiling around two to three times your average order and adjust once you see your RTO by order size.
2. Charge a small COD fee, and say so early
A ₹49 COD fee recovers almost all of the courier's ₹52 on Ayesha's delivered COD orders: 48 × ₹49 = ₹2,352 a month in the 20% RTO case. It also filters out some casual orders. Show it on the product page or in the delivery information, not as a surprise on the last checkout step; our cart abandonment guide explains why late surprises lose orders.
3. Confirm risky orders before dispatch
A short call or WhatsApp message before you pack catches wrong numbers and cold feet while the parcel is still on your shelf. You do not need to confirm every order. Confirm first-time buyers, orders near your COD ceiling, and multiple units of the same item. If nobody answers after two tries, hold the order rather than shipping it into an RTO.
4. Act on failed deliveries the same day
Once an NDR appears, the parcel is still recoverable. Call the buyer, fix the address or phone number, and request a reattempt. An RTO you prevent saves the ₹71 return freight and keeps the sale. Make the NDR list part of your morning routine, not something you check at month end.
5. Collect usable addresses
Ask for a landmark, check that the PIN code matches the city, and make the phone number required. A courier who can find the house and reach the buyer on the first attempt is the cheapest RTO prevention you have.
6. Give buyers a reason to pay online
The COD fee is one reason. Faster dispatch for prepaid orders is another, and so is simply making UPI the first option at checkout. If you are weighing how to take online payments in the first place, we compared the two main routes in direct UPI vs payment gateway.
7. Remember who refused before
A buyer who has refused two COD parcels is a pattern. Check the customer's order history before you confirm their next COD order, and ask for prepaid if the history is poor.
How this works in Selzix
Indian stores on Selzix can enable cash on delivery or cash at pickup, with order limits and an optional fee, alongside Razorpay or direct UPI using your own UPI ID or QR. That covers the first two tactics above directly: set a COD order limit and add a COD fee from your payment settings. Selzix charges no transaction fee on any of these methods; courier, gateway and COD charges are billed by those providers, not by Selzix.
You can connect Shiprocket or Delhivery for labels, pickup and tracking, or use any courier and add the tracking number to the order. Buyers follow their parcel on an order-tracking page, and you can see each customer's order history in the dashboard.
The limits are worth stating plainly. Selzix does not phone or message buyers to confirm COD orders for you, does not score orders for RTO risk, and does not manage NDRs; those happen in your courier or aggregator panel. COD remittance follows your courier's cycle. The full list of payment and delivery tools is on our features page, and the India setup is summarised at selzix.com/in. If you are comparing builders on per-order fees, see Selzix vs Dukaan.
Frequently asked questions
Is it worth offering COD for a new online store in India?
For most new stores selling to first-time buyers, yes. Run the break-even sum above with your own margin: unless most of your COD buyers would pay online if COD disappeared, switching it off loses more in sales than it saves in fees and RTO.
How much does the courier charge for COD?
Usually a fixed fee or a percentage of the order value, whichever is higher. As of October 2026, Shiprocket's Lite plan with Delhivery Surface lists ₹52 or 3.3%, before GST. Paid plans and other couriers differ, so check the rate card in your own account.
Can I charge customers extra for cash on delivery?
Many Indian sellers add a small COD fee. Show it clearly before the buyer places the order, ideally on the product page or delivery information, so the total at checkout is no surprise.
What is a good RTO rate for COD orders?
There is no single benchmark that holds across categories, regions and price points. Track your own RTO rate by payment method and order value for a month, then measure whether each change, such as a COD limit or confirmation calls, moves it.
When do I get the money from COD orders?
After the courier or aggregator remits it. Shiprocket documents a D+8 working-day processing time with credits on Mondays, Wednesdays and Fridays. Prepaid payments through Razorpay settle on a T+2 working-day cycle by default.
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