What is total expense ratio (TER)? A 2026 guide
What is total expense ratio (TER)? It is the annual cost of running a mutual fund scheme, expressed as a percentage of the scheme's daily net assets. If a fund has a TER of 1.5%, it charges 1.5% of assets a year to cover management, administration, and distribution. That cost is deducted from the scheme before the net asset value (NAV) is struck, so you never see a separate bill. It quietly reduces the return the fund delivers.
Definition
Total expense ratio (TER)
is the yearly cost a mutual fund charges to run a scheme, shown as a percentage of the scheme's daily net assets. It covers management, administration, and distribution, and is deducted before the NAV is calculated. SEBI caps it by scheme type and size. Source: SEBI (Mutual Funds) Regulations, 2026.
What does the total expense ratio include?
TER bundles the recurring costs of a scheme: the fund-management fee, registrar and custodian charges, audit and legal costs, marketing, and, in a regular plan, the distributor's trail commission. From April 1, 2026, SEBI restructured how this is shown. The scheme now discloses a base expense ratio (BER), which is the fee charged by the fund house, with brokerage and statutory taxes such as GST, STT, and stamp duty shown separately. Source: SEBI (Mutual Funds) Regulations, 2026.
What are the SEBI caps on TER?
SEBI sets the ceiling by scheme type and by how large the scheme is. Bigger schemes must charge less, on a sliding scale of asset slabs.
2.10%
Top base expense ratio slab for an equity scheme under 500 crore rupees, from April 1, 2026 (was 2.25%)
Source: SEBI (Mutual Funds) Regulations, 2026
Under the SEBI (Mutual Funds) Regulations, 2026, effective April 1, 2026, the highest slab for an open-ended equity scheme with assets under 500 crore rupees fell from 2.25% to 2.10%. Debt schemes were cut in line, and the cap on index funds dropped from 1.00% to 0.90%. The cap keeps falling as scheme assets grow, so a very large fund is bound to a lower number. Source: SEBI.
How to read a TER before you rely on it
Treat TER as a dated cost input, not a scorecard:
- Check the plan. A direct plan and a regular plan hold the same portfolio, but the regular plan's TER includes a distributor commission. See direct vs regular mutual fund plans.
- Check the date. TER changes when assets or costs change, and the scheme restates it. Read the figure on the latest factsheet, not an old one.
- Compare like with like. An index fund's cap sits far below an active equity fund's, so the numbers are only comparable within the same category.
So total expense ratio is the annual cost a scheme charges, capped by SEBI and disclosed on every factsheet. Flock reads mutual fund holdings from the monthly portfolio disclosures and keeps each figure dated and sourced. To see what funds actually hold, start with how to find which mutual funds are buying a stock or the mutual fund portfolio tracker. What any of it means for your own decision is your call to make.
Frequently asked questions
What does the total expense ratio include?
TER is the annual cost of running a mutual fund scheme, expressed as a percentage of the scheme's daily net assets. It covers fund-management fees, administration, and distribution costs. From April 1, 2026, SEBI splits it into a base expense ratio plus separately shown brokerage and taxes. Source: SEBI (Mutual Funds) Regulations, 2026.
What is the maximum TER a mutual fund can charge?
Under the SEBI (Mutual Funds) Regulations, 2026, effective April 1, 2026, the top base expense ratio slab for an open-ended equity scheme with assets under 500 crore rupees is 2.10%, down from 2.25%. The cap for index funds is 0.90%. Caps fall as scheme assets rise. Source: SEBI.
Where can I find a fund's expense ratio?
Every mutual fund discloses its TER on the scheme factsheet and its website, and updates it when it changes. AMFI also publishes scheme-level TER data. Always check the date on the figure you read. Source: SEBI, AMFI.
Does a lower expense ratio mean a better fund?
TER is one cost input, not a verdict. It reduces the return the scheme delivers, but it says nothing about the portfolio or the manager. This page explains what TER is and where it is disclosed, not which fund to buy. Source: SEBI disclosure norms.
Flock tracks these filings, sourced, dated, and linked back to the original. See what smart-money entities disclosed, without the guesswork about what it means.
Disclosures shown are public regulatory filings. Data may be delayed or incomplete. Smart-money entities may no longer hold positions shown. Not investment advice.