Expense Ratio on WebNotes

How to read mutual fund expense disclosure

Tue, 19 May 2026 00:00:00 +0000

MF expense disclosure is the most underweighted variable in retail decisions. 1% TER seems small until you compound it over 25 years.

Conflict-of-interest disclosure. This guide is published by WebNotes Editorial Team for informational purposes. WebNotes has no commercial relationship with any AMC or platform. No affiliate commission is earned.

Step-by-step procedure

See the procedure infobox above for the six steps.

TER caps (SEBI)

AUM slab	Equity max	Debt max
First Rs 500 crore	2.25%	2.00%
Next Rs 250 crore	2.00%	1.75%
Next Rs 1,250 crore	1.75%	1.50%
Next Rs 3,000 crore	1.60%	1.35%
Next Rs 5,000 crore	1.50%	1.25%
Next Rs 40,000 crore	5 bps reduction per Rs 5,000 crore	same
Above	1.05%	0.80%

Direct plan: Regular TER minus distribution commission.

TER regulation and slabs for Indian mutual funds

Mon, 18 May 2026 00:00:00 +0000

The Total Expense Ratio (TER) is the annual percentage of scheme AUM charged by mutual fund AMCs as fees and operational costs. TER is the principal direct charge on a mutual fund investment: every rupee of TER reduces investor return by the same rupee on a one-to-one basis. SEBI prescribes maximum TER caps by scheme category and AUM slab through the SEBI (Mutual Funds) Regulations 1996 and accompanying circulars, with AMCs free to charge less than the cap but not more.

Total Expense Ratio (TER) in mutual funds

Mon, 18 May 2026 00:00:00 +0000

The Total Expense Ratio (TER) is the annual percentage of scheme AUM that a mutual fund AMC charges as fees and operational costs. TER is the principal direct charge on a mutual fund investment: every rupee of TER reduces the investor’s net return by the same rupee. SEBI prescribes maximum TER caps by scheme category and AUM slab through the TER regulation and slabs framework.

For Indian retail investors, understanding TER is foundational because:

Total Expense Ratio of Indian mutual funds

Sat, 16 May 2026 00:00:00 +0000

The Total Expense Ratio (TER) is the annual percentage of a mutual fund scheme’s daily net assets that the asset management company (AMC) is permitted to charge as the aggregate cost of managing and operating the scheme. In the Indian regulatory framework, TER is governed by Regulation 52 of the SEBI (Mutual Funds) Regulations, 1996 , read with the SEBI Master Circular on Mutual Funds (most recently reissued in May 2024) and a sequence of substantive amending circulars issued in September 2012 and October 2018. TER is a hard, slab-based cap on the recurring expenses an AMC may charge to a scheme, and is the single most consequential expense disclosure in the Indian mutual fund industry.

How to switch from regular to direct mutual fund via Coin

Tue, 12 May 2026 00:00:00 +0000

Switching from a regular plan to a direct plan of the same mutual fund scheme is one of the highest-impact, zero-cost investment improvements available to retail mutual fund investors in India. A regular plan includes a distributor trail commission (typically 0.5%–1.0% per annum for equity funds) embedded in its Total Expense Ratio (TER). A direct plan of the same scheme, available on Zerodha Coin , does not include this commission, resulting in a lower TER and consequently higher NAV growth over time.

Regular plan vs direct plan mutual fund

Tue, 12 May 2026 00:00:00 +0000

Every mutual fund scheme offered by an asset management company (AMC) in India is required to provide two separate plan options: a regular plan and a direct plan. The Securities and Exchange Board of India (SEBI ) mandated the availability of direct plans through a circular dated 22 October 2012, effective from 1 January 2013. The two plans invest in an identical portfolio of securities under the same fund manager, but differ in the expense ratio charged to investors, reflecting the presence or absence of distributor commission.

Total expense ratio in mutual funds

Tue, 12 May 2026 00:00:00 +0000

The total expense ratio (TER) is the annual charge that a mutual fund levies on its scheme’s assets to recover all costs of running the fund, expressed as a percentage of the scheme’s average daily net assets (AUM). It is the single most important cost number investors should examine before selecting a fund, because it is deducted from returns every day before the net asset value (NAV) is published.

What the TER covers

SEBI regulations (Regulation 52 of the SEBI (Mutual Funds) Regulations, 1996, as amended) permit a mutual fund to recover the following expenses from scheme assets: