Expense Ratio (TER) — 2026 Rules
What you pay every year and the new SEBI base-expense-ratio caps.
Updated 27 September 2026 · SEBI rules as of 2026Overview
The expense ratio is the annual cost of running a scheme, deducted daily from NAV. Under the SEBI (Mutual Funds) Regulations, 2026 (effective 1 April 2026), caps apply to a Base Expense Ratio (BER) that excludes statutory levies (GST, STT, stamp duty, SEBI and exchange fees), which are now charged on actuals. The extra 5 bps earlier allowed for schemes with exit loads was removed, and brokerage caps were cut.
| Particular | Details |
|---|---|
| Open-ended equity (up to ₹500 cr AUM) | 2.10% BER, stepping down as AUM rises |
| Index funds / ETFs | 0.90% |
| Liquid / index FoF | 0.90% |
| FoF (> 65% equity) | 2.10% |
| Other FoFs | 1.85% |
| Closed-end equity | 1.00% |
| Closed-end non-equity | 0.80% |
| Brokerage cap | 6 bps cash; 2 bps derivatives |
Why it matters
| Expense ratio | Invested | Value after 10 years at 12.5% gross return |
|---|---|---|
| 0.5% (net return 12%) | ₹12 lakh (₹10k × 120 m) | ≈ ₹23.2 lakh |
| 1.5% (net return 11%) | ₹12 lakh | ≈ ₹21.9 lakh |
Reduce costs
- Choose direct plans
- Use index funds for large-cap exposure
- Compare TER within category
Frequently asked questions
Is the expense ratio charged separately?
No, it is built into the daily NAV.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Information is educational and may change with SEBI / tax rules — verify with the AMC, AMFI or SEBI. FinancePortal is not an investment adviser.