Total Expense Ratio (TER)
Total Expense Ratio (TER) is the total annual cost charged to a mutual fund scheme as a percentage of its assets. From April 2026 it equals the base expense ratio plus brokerage, transaction costs and statutory levies.
What Is Total Expense Ratio (TER)?
Total Expense Ratio (TER) is the regulatory measure of all expenses charged to investors of a mutual fund scheme, expressed as a percentage of the scheme's assets. It is the precise, SEBI-defined version of what most people call the expense ratio.
The SEBI (Mutual Funds) Regulations, 2026, which came into force on 1 April 2026, changed how TER is structured. SEBI now caps a component called the Base Expense Ratio (BER), and the TER is:
TER = Base Expense Ratio + Brokerage cost + Transaction cost + Statutory levies (including GST)
Under the earlier framework, most statutory levies were counted inside the expense limits. SEBI's December 2025 board decision explained that the new BER limits exclude all statutory levies, which are charged on actuals, so that investors can see clearly what goes to the AMC and its service providers versus what goes to the government and market infrastructure.
How Does It Work?
- Base expenses (BER): Investment management and advisory fee, distribution commission (regular plans), registrar, trustee, audit, custodian, investor communication and other permitted recurring expenses. These are capped by scheme type and size.
- Brokerage: Charged over and above BER, up to 0.06% of trade value for cash market and 0.02% for derivatives transactions. Brokerage beyond these limits must fit within the BER limit.
- Transaction costs: Regulatory levies and charges of stock exchanges, clearing corporations and clearing houses for executing trades. These are not part of BER.
- Statutory levies: Items such as GST, STT/CTT and stamp duty, charged on actuals.
- Daily charging: TER is accrued every day and reflected in the NAV.
- Daily disclosure: AMCs must disclose the TER of every scheme, date-wise, on their website and on the AMFI website under a separate head, in a downloadable spreadsheet format.
- Change notice: An increase or other change in BER (except changes due to AUM movement or regulatory reductions) must be notified to investors by email or SMS at least three working days before it takes effect.
Maximum BER limits (2026 Regulations):
| Scheme type | Maximum BER |
|---|---|
| Index funds and ETFs | 0.90% |
| FoFs investing in liquid schemes, index funds and ETFs | 0.90% (including underlying) |
| FoFs investing at least 65% in equity-oriented schemes | 2.10% (including underlying) |
| Other FoFs | 1.85% (including underlying) |
| Close-ended equity-oriented schemes | 1.00% |
| Close-ended other schemes | 0.80% |
Other open-ended schemes, by slab of daily net assets:
| Slab | Equity-oriented | Other than equity-oriented |
|---|---|---|
| First ₹500 crore | 2.10% | 1.85% |
| Next ₹250 crore | 1.90% | 1.65% |
| Next ₹1,250 crore | 1.60% | 1.40% |
| Next ₹3,000 crore | 1.50% | 1.25% |
| Next ₹5,000 crore | 1.40% | 1.15% |
| Next ₹40,000 crore | Reduces by 0.05% for every ₹5,000 crore increase | Same |
| Balance | 0.95% | 0.70% |
SEBI also removed the additional 5 basis points that schemes with exit loads were earlier allowed to charge as a transitional measure.
Practical Example
Illustrative figures only.
1. Maximum BER for a mid-sized equity scheme
An open-ended equity-oriented scheme has daily net assets of ₹1,000 crore.
- First ₹500 crore × 2.10% = ₹10.50 crore
- Next ₹250 crore × 1.90% = ₹4.75 crore
- Remaining ₹250 crore (within the next ₹1,250 crore slab) × 1.60% = ₹4.00 crore
- Maximum BER = ₹19.25 crore a year, i.e. ₹19.25 ÷ ₹1,000 × 100 = 1.925%
2. Building the TER
Suppose the scheme's regular plan charges:
| Component | % of assets |
|---|---|
| BER | 1.10% |
| Brokerage and transaction costs | 0.05% |
| Statutory levies (including GST on fees) | 0.15% |
| TER | 1.30% |
3. What it means for an investor
On an investment worth ₹2,00,000 through the year, the cost at 1.30% ≈ ₹2,00,000 × 1.30% = ₹2,600, or about ₹2,600 ÷ 365 ≈ ₹7.12 a day, deducted through the NAV. Assumptions: investment value constant; numbers simplified.
Why Is It Important?
- Direct impact on returns: Every rupee of TER reduces your net return.
- Comparability: Daily disclosure on AMC and AMFI websites lets you compare schemes.
- Transparency of components: The 2026 structure separates what is capped (BER) from statutory and market costs.
- Plan choice: Direct plans have lower TER than regular plans because they exclude distribution commission.
Key Features or Components
- Capped BER, slab-based for most open-ended schemes.
- Brokerage caps of 0.06% (cash) and 0.02% (derivatives) of trade value, over and above BER.
- Transaction costs and statutory levies charged on actuals.
- Daily disclosure on AMC and AMFI websites.
- Advance notice of BER changes by email or SMS.
- No other charges may be levied beyond BER, brokerage, transaction cost, statutory levies and exit load as specified by SEBI.
- New Fund Offer expenses must be borne by the AMC, trustees or sponsor, not the scheme.
Benefits and Limitations
Usefulness
- Single, regulated figure capturing all ongoing costs.
- Caps protect investors from excessive charges.
Limitations and pitfalls
- TER varies with scheme size and portfolio activity, so it can change over time.
- Brokerage and statutory costs depend on how much the fund trades, so high-turnover funds may show higher TER.
- Older articles and comparisons may quote the pre-April 2026 limits, which included statutory levies; compare current figures only.
Comparison With Related Concepts
| Concept | Meaning | Key difference | Practical implication |
|---|---|---|---|
| TER | All expenses charged to the scheme | BER + brokerage + transaction costs + statutory levies | The figure to compare across schemes |
| BER | Capped portion of expenses | Excludes statutory levies and transaction costs | SEBI's limits apply to this |
| Expense ratio | Common term for scheme costs | Often used interchangeably with TER | Check which figure a source quotes |
| Exit load | Charge on early redemption | One-time and conditional | Not part of TER |
How Does It Apply to Mutual Fund Investors?
- Scheme selection: Compare TER within the same category and plan type.
- Documents: The SID includes a web link to the scheme's TER for the last six months and daily TER, and an illustration of TER's impact on direct and regular plan returns.
- Monitoring: Read BER change notices and check daily TER disclosures on the AMC or AMFI website.
- Long-term planning: Account for TER when estimating goal corpus, since projected returns should be net of costs.
Common Mistakes and Misconceptions
- "TER limits are the same as before April 2026." Correct: The 2026 Regulations introduced BER, which excludes statutory levies, with revised slabs. Why it matters: Old numbers can mislead comparisons.
- "TER is charged once a year." Correct: It accrues daily through the NAV. Why it matters: You never see a separate bill, but you always pay it.
- "A fund at the TER cap is overcharging." Correct: The cap is a regulatory ceiling; charging within it is permitted. Why it matters: Compare actual value delivered, not just cost.
- "TER includes exit load." Correct: Exit load is separate. Why it matters: Check both before investing.
Important Terms to Know
- Expense Ratio: the everyday term for scheme costs.
- Direct Plan vs Regular Plan: plans with different TERs.
- Assets Under Management (AUM): scheme size, which determines BER slabs.
- Exit Load vs Expense Ratio: how the two charges differ.
- Portfolio Turnover Ratio: trading activity, which affects brokerage.
- Index Funds: passive schemes with a 0.90% BER cap.
Key Takeaways
- TER is the total annual cost charged to a scheme, deducted daily through NAV.
- From 1 April 2026, TER = BER + brokerage + transaction costs + statutory levies.
- BER caps depend on scheme type and size; equity schemes start at 2.10% for the first ₹500 crore.
- TER is disclosed daily on AMC and AMFI websites, and BER changes need advance notice.
- Compare current TERs within the same category and plan type.
Related Glossary Terms
- Expense Ratio
- Exit Load vs Expense Ratio
- Direct Plan vs Regular Plan
- Assets Under Management (AUM)
- Fund of Funds (FoF)
- Active vs Passive Funds
References
- SEBI (Mutual Funds) Regulations, 2026 (amended up to 7 July 2026), Chapter XI: Expenses
- SEBI Master Circular for Mutual Funds (20 March 2026), Chapter 11
- SEBI Board Meeting press release, 17 December 2025
Disclaimer
This article is for educational and informational purposes only. It is not personalised investment, tax or legal advice, and it does not recommend any specific scheme. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Rules mentioned here can change, so check the latest SEBI and AMFI updates, and consider your financial goals, risk profile and investment horizon (or speak to a qualified professional) before making any decision.
Published by FynnChintan Finserv, an AMFI-registered mutual fund distributor. Beyond Numbers. Into Opportunities.
Want to keep learning? Explore the related terms above in the FynnChintan Financial Glossary, or read more about building a financial plan around your goals.
Frequently Asked Questions
What is the maximum TER for an equity mutual fund?
SEBI caps the BER, not the full TER. For open-ended equity-oriented schemes, the BER cap is 2.10% on the first ₹500 crore of daily net assets, falling in slabs to 0.95% on the balance. Brokerage, transaction costs and statutory levies are charged in addition.
Where can I check a scheme's daily TER?
AMCs must disclose scheme-wise, date-wise TER daily on their websites and on the AMFI website, under a separate head titled "Total Expense Ratio of Mutual Fund Schemes", in a downloadable format.
Why did SEBI change the TER structure in 2026?
SEBI's board said the revision was meant to bring clarity on statutory levies, with expense limits (now BER) excluding all statutory levies, which are charged on actuals. It also reduced brokerage caps and removed the additional 5 basis points for schemes with exit loads.
Will I be informed if TER increases?
A change in BER, other than one caused by AUM movement or a regulatory reduction, must be communicated by email or SMS at least three working days before it takes effect, and the notice must be placed on the AMC's website.
What is the difference between TER and BER?
BER is the capped portion of a scheme's expenses, covering management fees, distribution commission and operating costs. TER adds brokerage, transaction costs and statutory levies such as GST to the BER. SEBI's limits apply to BER, while TER is the total you bear.
This explanation is for general education only and is not investment advice. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.