The program will be rolled out in 200 districts across the country with special drives in Karnataka, Kerala, Tamil Nadu, Andhra Pradesh and Telangana.
The digital payments firm said that the merchants across the country have played a pivotal role in this by accepting a wide range of digital payment methods and being a part of the Paytm community.
"The company is committing Rs 50 crore for the program this year which will uplift over 2 crore merchants who use Paytm in their day-to-day life," the company said in a statement.
Merchants with the most number of transactions made through the Paytm app before Diwali, will be rewarded with certificates for being the top merchants and will also receive free Soundbox, IoT devices and many such rewards.
Customers, who scan the Paytm QR code at the stores to pay through the Paytm app, will receive cashback on each transaction, the statement said.
"India has made significant strides in its Digital India mission, which empowers all with technological advancements. This mission is bound to contribute to the country''s growing economy.
"Paytm's Guaranteed Cashback offer is to recognise the top merchants, who are at the heart of India's growth and have made Digital India a success," Paytm founder and CEO Vijay Shekhar Sharma said.
Paytm will also be offering its soundbox, an audio device from the company which tells about transaction status, at 50 per cent discount through its Paytm for business app to eligible merchants.
Digital India Mission president and CEO Abhishek Singh said that over the last six years, the Digital India mission has grown leaps and bounds to put India on the global innovation map.
"Paytm's Guaranteed Cashback offer will encourage India's millions of merchants to trust digital payments and come on the path of innovation and contribute to the cashless economy," Singh said in the statement.