Mutual fund expense ratio rules 2026: BER vs TER

The change is about cost structure and disclosure; it does not make every fund cheaper by the same amount. A fund can have a lower BER but incur different brokerage, transaction costs or statutory levies. Your return is affected by the total recurring cost actually charged to the scheme.

Under the current framework:

The BER is the capped base amount available for the recurring expenses of managing and operating the scheme. The other permitted components are added in the manner allowed by the regulations and SEBI's consolidated circular. Read the current legal text on the SEBI Mutual Funds Regulations, 2026 page and the SEBI master circular for mutual funds.

An expense ratio is expressed as an annual percentage of a scheme's average net assets, but expenses are reflected in the scheme's net asset value. You do not normally receive a separate monthly bill. A small percentage difference can matter when it continues over many years, so compare like with like.

SEBI notified the new Mutual Funds Regulations in January 2026, with the new expense framework taking effect from 1 April 2026. The stated architecture distinguishes the fund manager's base expense from permitted transaction and government or regulatory charges. It also removed the earlier additional expense allowance linked to exit-load flows and revised how brokerage is dealt with.

The final regulation, not an old consultation paper or a fund distributor's graphic, controls. SEBI's rules prescribe different BER ceilings for different types of schemes and, for many open-ended schemes, different asset-size slabs. That means there is no single legal percentage that answers “What is the maximum expense ratio for every mutual fund?”

For example, the regulations separately deal with index funds and exchange-traded funds, funds of funds, close-ended schemes and ordinary open-ended schemes. The category and assets under management matter. Before quoting a cap, identify the exact scheme category and read the current version of regulation 66 and the applicable circular.

Suppose two funds show the same BER. Their total costs can still differ because trading frequency, permitted brokerage and statutory levies can differ. Conversely, a higher-cost fund is not automatically unsuitable: investment objective, tracking error, risk, portfolio quality and consistency with your goal also matter. Cost is one decision factor, not a prediction of returns.

Use this comparison sequence:

1. identify the exact scheme, including whether it is a direct or regular plan;
2. compare the current TER, not a historical launch figure;
3. compare only schemes with a genuinely similar investment mandate;
4. check whether the figure shown is for the same plan and option;
5. look at tracking error for an index fund or ETF;
6. read the scheme information document and current addenda;
7. note any announced TER change and its effective date;
8. keep a PDF or screenshot of the disclosure used for your decision.

The SEBI mutual-fund investor FAQ explains the basic role of recurring expenses. For current scheme figures, begin with the asset-management company's official website and cross-check the scheme information available through official industry disclosures.

Direct and regular plans of the same scheme hold the same portfolio, but a regular plan includes distribution-related cost permitted under the framework. Their NAVs and expense ratios therefore differ. Make sure a comparison page has not silently placed a direct plan beside another fund's regular plan.

“Direct” does not mean no expense. It means you invest without the regular-plan distribution route. The scheme still incurs management and operating expenses and any other permitted components. If you need personal advice, assess whether the advice is regulated and how the adviser or distributor is paid.

For a rough illustration only, if an investment remained exactly ₹5,00,000 for a full year and the TER remained exactly 1%, the simple annualised cost indication would be ₹5,000. Real calculations do not work so neatly because the scheme's net assets and TER can change and expenses are reflected through NAV. Do not treat the multiplication as an invoice or a return forecast.

When comparing costs, record:

First write to the AMC using the grievance channel in its official scheme documents. Ask a narrow question and attach the exact statement, factsheet or webpage:

Please identify the BER, each other permitted expense component and the TER
applied to [full scheme / plan / option] on [date]. Please provide the relevant
disclosure, the effective date of the rate and the provision relied upon for
the disputed charge or change.

Do not send account credentials, passwords, OTPs or a full unmasked bank statement. Keep the folio number partly masked in ordinary email unless the AMC's secure channel asks for the necessary details.

If the AMC does not resolve the grievance, use SEBI SCORES through the official address. SCORES is a grievance-redress platform; it does not guarantee compensation or investment performance. Preserve the AMC complaint number and its response because the regulator will need a clear issue and an audit trail.

An AMC is generally not transformed into a public authority merely because it runs a mutual fund. RTI is therefore not the normal route for a personal folio dispute. Use the AMC grievance process and SCORES.

RTI may be useful for identifiable records held by a public authority—for example, a copy of a regulatory order that is not already public, or the recorded status of a representation made to a public authority. Do not use RTI to ask SEBI to calculate your loss, give investment advice or decide a private dispute. Draft record-based questions with The RTI Playbook or the RTI Assistant.

Treat these claims cautiously:

• “BER is the only cost after April 2026.”
• “SEBI guarantees the cheapest fund will perform best.”
• “Every scheme has one common expense cap.”
• “A regular plan and direct plan should have the same NAV.”
• “A distributor can refund market loss by filing a regulatory complaint.”
• “A screenshot with no scheme, plan or effective date proves overcharging.”

Use the latest official regulation and disclosure because expense rules and scheme rates can change.

BER is the Base Expense Ratio under SEBI's 2026 framework. It is the base component for recurring scheme expenses, subject to the category and asset-size limits in the regulations.

No. TER is the total recurring cost after adding the other components that the rules permit, including specified brokerage or transaction costs and statutory or regulatory levies.

Yes. SEBI's notified 2026 framework provides for the revised expense architecture from 1 April 2026. Check later amendments when using this guide after its review date.

No. Scheme category and, for relevant schemes, asset-size slabs affect the applicable ceiling. Read the final regulation for the exact scheme instead of applying a social-media table to every fund.

No. It avoids the regular-plan distribution route, but management, operating and other permitted scheme expenses still remain.

Use the AMC's official scheme page, factsheet, SID and addenda. Record the full scheme, plan, option and effective date so that the comparison is reproducible.

Do not assume so. SCORES provides a structured grievance route. The result depends on the facts, the regulated entity's response and the applicable law; it is not a refund guarantee.

Usually RTI is not the route for a private AMC or a personal folio calculation. Use the AMC and SCORES. Use RTI only for existing, identifiable records held by a public authority.

• SEBI (Mutual Funds) Regulations, 2026, amended through 7 July 2026
• SEBI master circular for mutual funds, 20 March 2026
• SEBI Board memorandum explaining the proposed expense framework
• SEBI investor FAQ on mutual funds
• SEBI SCORES grievance portal

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Reviewed against official sources on 1 September 2026. Recheck the latest regulation, amendment and scheme disclosure before acting. This guide explains the process; it is not investment advice.