An investor looking at a fund factsheet under the new disclosure may now see a base expense ratio (BER) of 1.20%, permitted brokerage of 0.03% and levies of 0.04% for the measurement period, so the total comes to 1.27%. This figure is no longer printed as one bundled line in the factsheet, and the explanation of the base expense ratio given in most fund house notes begins with a sum of this kind.
The revised framework from SEBI is the statutory regulator of India's securities market, with the legal duty to protect investors and to promote and regulate that market. Read the full meaning of SEBI has applied since 1 April 2026. As per the explainer published by Kotak Mutual Fund, the costs of a scheme will now be shown under separate heads, which are the BER, the brokerage and transaction costs, the exchange and regulatory charges and the statutory levies. Earlier, many of these items had been included together in one disclosed number.
Many families holding mutual funds through A SIP is a method of investing a fixed amount in a mutual fund scheme at regular intervals, usually monthly, by automatic bank debit. Read the full meaning of SIP are now receiving a factsheet which looks different from the factsheet they had been seeing earlier. The total expense ratio (TER) is still being disclosed, however it is now shown as the sum of the separate parts, and investors will have to read each of these parts individually.
Value Research, Moneylife and Wright Research have described the change as a move towards transparency. These reports also say that the lower caps announced along with the framework have to be read with care, as the numbers before and after the change do not always include the same items.
This piece will first describe the four cost pieces and the manner in which the TER is now being calculated. Thereafter, there will be a comparison of the old caps and the new caps for An open ended mutual fund that holds the securities of a market index, such as the Nifty 50, in the same weights, so its returns stay close to that index. Read the full meaning of Index Fund, cash market brokerage and derivatives brokerage. The last section will describe how much of the reduction in caps is reclassification and how much is an actual reduction, alongside the position of performance linked fees and the manner in which some platforms are displaying the figures.
The four pieces behind the total
As per the explainers of Value Research and Moneylife, this is the part that the AMC keeps for its own work of managing the fund, and it is the only part that the fund house sets within the limit allowed by SEBI.
The second piece is brokerage and the transaction costs of trade execution. Moneylife reports that the transaction costs are excluded from the BER, so they are shown on their own line and are not hidden inside the AMC fee. Brokerage is permitted only up to a limit, and this limit is separate from the BER limit.
The fourth piece consists of the statutory levies. Value Research says these include STT or CTT, GST, stamp duty, SEBI fees and exchange fees. They are charged on actuals, which means the scheme pays what is actually incurred and they sit over and above the permitted brokerage limits.
For individuals reading these four lines together, there will be more entries in the factsheet than before, and each of these entries comes from a different source. Some are decided by the AMC, while others depend on how many trades the fund manager has done and on the taxes applicable at that time.
How the TER is now calculated
The total expense ratio continues to exist, but only as an aggregate. Value Research gives the formula under the new framework as TER equal to BER plus brokerage plus regulatory levies plus statutory levies. There is no separate fifth cost behind the TER, and it is simply the sum of the pieces shown above.
Moneylife explains that earlier, brokerage, STT, stamp duty and exchange fees were bundled into the disclosed TER. Investors therefore saw one number and could not easily find out how much of it was the fee of the AMC and how much was the cost of trading and taxes. Now these items have to be shown separately.
Any other item is outside this list.
Wright Research states that the AMCs must also keep a prominent daily disclosure of the TER. For the families which track their funds regularly, this means the total figure is available every day, and the split behind it can be checked against the formula above.
Old caps against new caps
Wright Research has compared the limits that applied earlier with the limits that apply now, and the comparison is easier to follow when the three limits are read one below the other. In each case, the older figure and the newer figure do not include same items.
- Index funds and exchange traded funds (An exchange traded fund is a mutual fund scheme with units listed on a stock exchange, built to follow an index or an asset such as gold. Read the full meaning of ETF): the BER ceiling is now 0.90% excluding levies, against the earlier 1.00% that included them.
- Cash market brokerage: the cap is now 6 bps excluding levies, against the earlier 12 bps including levies.
- Derivatives brokerage: the cap has been cut to 2 bps from about 5 bps, which was the older bundled cap.
A basis point (bps) is one hundredth of a percentage point, so 6 bps is the same as 0.06%. Investors who see the cash market figure as 6 bps and the earlier figure as 12 bps may take it as a reduction to half, but the two numbers have been measured in different ways.
Index fund and ETF figure shows the same pattern. The older 1.00% had the levies inside it, while the new 0.90% leaves them out. The levies have not been removed from the cost of the scheme, and they will now appear on their own line in the disclosure.
For the derivatives limit, Wright Research describes the older figure as about 5 bps and as a bundled cap. The report itself has used the word "about" for the older figure, so the exact earlier number is not being given as a fixed one. The new limit of 2 bps is the clearer figure of the three, since it is the permitted brokerage alone.
Many families who invest in index funds through monthly SIPs are likely to notice the 0.90% figure first, since it is the one printed at the top of the disclosure. The other two figures concern the trading activity of the scheme, and they appear lower down in the cost breakup.
Wright Research gives these limits as ceilings which means a fund house may charge less than the cap but not more. The report does not say how many schemes are charging at the ceiling.
Reading the old and the new numbers side by side, there is one point that applies to all three limits. The earlier figure was a total that had several items inside it, and the present figure is a single item, with the remaining items shown separately. A comparison that places 1.00% next to 0.90%, or 12 bps next to 6 bps, therefore compares a bundle with a part of that bundle.
The next section looks at how much of this difference is reclassification and how much is an actual reduction in what investors pay.
A lower cap is not always a lower bill
Value Research says much of the apparent cut in caps is reclassification. The statutory levies have moved outside the base ratio and they have not disappeared from the cost of the scheme.
Investors looking only at the lower ceiling may therefore expect a smaller deduction from their returns. However, the levies are charged on actuals, and they sit over and above the permitted brokerage limits, so the final amount depends on the trading done by the fund and the taxes applicable at that time.
Moneylife reports that performance linked base expense ratios are also allowed under the new framework. These will be subject to conditions set by SEBI and to enhanced disclosure by fund houses. For families holding funds that choose such a structure, the base ratio may not remain at one level throughout the year.
The TER adds brokerage, transaction costs and levies to the BER, and a screen showing only the BER leaves these items out.
For investor who compares two funds, the position is that a fund with a lower base ratio may still show a higher total, since brokerage and levies are added after the base ratio and differ from one scheme to another. The levies are charged on actuals, and a fund that trades more often will therefore show larger amounts on those lines than a fund that trades rarely. The base ratio alone does not show this difference.
Value Research and Moneylife both describe the new format as clearer than the earlier single number, and the explainers say that the separate lines allow individuals to see which part of the cost is decided by the AMC and which part depends on trading and taxes. The explainers do not say that the total paid by investors has come down by the same amount as the caps.
Many families are now reading factsheets and investment apps side by side, and the two do not always show the same items. The TER, with brokerage, transaction costs and levies added to the BER, is the figure that still needs checking.
