The expense ratio is the most-ignored, highest-impact number in any mutual fund decision. A 1.5% expense ratio doesn't sound expensive — until you realise it compounds against you for 20+ years, wiping out 25-40% of your final corpus vs a low-cost alternative. Here's the 2026 benchmark sheet by fund type + the 14 cheapest funds available to Indian investors + how to find the TER for any scheme.
2026 expense ratio benchmarks by fund type
| Fund type | Great (direct) | Acceptable (direct) | Overpriced (direct) | SEBI TER cap |
|---|---|---|---|---|
| Nifty 50 Index Fund | ≤0.20% | 0.20-0.40% | >0.40% | 1.05% |
| Sensex Index Fund | ≤0.20% | 0.20-0.40% | >0.40% | 1.05% |
| Nifty Next 50 Index Fund | ≤0.30% | 0.30-0.50% | >0.50% | 1.05% |
| Active Large Cap Fund | <0.80% | 0.80-1.20% | >1.50% | 2.25% |
| Active Mid Cap Fund | <0.90% | 0.90-1.40% | >1.60% | 2.25% |
| Active Small Cap Fund | <1.00% | 1.00-1.50% | >1.70% | 2.25% |
| ELSS (Tax-saver) | <0.90% | 0.90-1.30% | >1.50% | 2.25% |
| Flexi Cap Fund | <0.90% | 0.90-1.30% | >1.50% | 2.25% |
| Hybrid Aggressive | <1.00% | 1.00-1.40% | >1.60% | 2.25% |
| Hybrid Conservative | <0.80% | 0.80-1.20% | >1.40% | 2.00% |
| Debt — Liquid Fund | <0.20% | 0.20-0.40% | >0.50% | 2.00% |
| Debt — Corporate Bond | <0.40% | 0.40-0.70% | >0.80% | 2.00% |
| Debt — Long Duration | <0.50% | 0.50-0.80% | >1.00% | 2.00% |
| Gold ETF | ≤0.30% | 0.30-0.50% | >0.60% | 1.00% |
| International FOF (Fund of Funds) | <0.50% | 0.50-1.00% | >1.20% | 1.50% |
Add ~0.50-1.50% to all the above for Regular plan equivalents. SEBI TER cap = regulatory ceiling per Scheme AUM band; bigger schemes have lower mandatory cap.
How SEBI's TER cap works
SEBI mandates a sliding scale TER cap based on Assets Under Management (AUM) for each scheme. Larger funds = lower TER cap. As of 2026:
| Scheme AUM | TER cap (Equity) | TER cap (Debt) |
|---|---|---|
| Up to ₹500 crore | 2.25% | 2.00% |
| ₹500-750 crore | 2.00% | 1.75% |
| ₹750-2,000 crore | 1.75% | 1.50% |
| ₹2,000-5,000 crore | 1.60% | 1.35% |
| ₹5,000-10,000 crore | 1.50% | 1.25% |
| ₹10,000-50,000 crore | 1.35% | 1.00% |
| >₹50,000 crore | 1.05% | 0.80% |
Bigger AMCs (HDFC, ICICI Pru, Nippon, SBI MF) have multiple funds above the ₹50,000 crore AUM threshold — capped at 1.05% (equity) and 0.80% (debt). Smaller AMCs have less pricing pressure from this cap.
The 20-year compound impact
| Expense Ratio | Final corpus after 20 years | vs 0.20% baseline |
|---|---|---|
| 0.20% | ₹93.3 lakh | — |
| 0.50% | ₹86.5 lakh | −₹6.8 lakh |
| 0.80% | ₹80.5 lakh | −₹12.8 lakh |
| 1.00% | ₹76.8 lakh | −₹16.5 lakh |
| 1.50% | ₹68.5 lakh | −₹24.8 lakh |
| 2.00% | ₹61.1 lakh | −₹32.2 lakh |
| 2.25% (SEBI cap) | ₹57.8 lakh | −₹35.5 lakh |
Assumes ₹10 lakh invested for 20 years at 12% gross annual return. Net return = gross return minus expense ratio.
Bottom line: switching from a 1.50% expense fund to a 0.50% expense fund saves ₹18+ lakh on a ₹10L base — for an investment requiring zero additional work from you.
14 cheapest equity mutual funds in India (Direct plans, 2026)
| Fund | Category | TER (Direct) | TER (Regular) |
|---|---|---|---|
| UTI Nifty 50 Index Fund | Large Cap Index | 0.20% | 0.30% |
| HDFC Index Fund Nifty 50 | Large Cap Index | 0.20% | 0.40% |
| ICICI Pru Nifty 50 Index | Large Cap Index | 0.18% | 0.40% |
| SBI Nifty Index Fund | Large Cap Index | 0.18% | 0.65% |
| Nippon India Index Fund Sensex | Large Cap Index | 0.15% | 0.45% |
| HDFC Index Fund Sensex Plan | Large Cap Index | 0.20% | 0.40% |
| UTI Nifty Next 50 Index | Large Cap Plus | 0.34% | 0.85% |
| Motilal Oswal Nifty 500 Index | Broad Market | 0.30% | 1.00% |
| Axis ELSS Tax Saver Direct | ELSS | 0.75% | 1.65% |
| Mirae Asset ELSS Tax Saver Direct | ELSS | 0.70% | 1.55% |
| Parag Parikh Flexi Cap Direct | Flexi Cap | 0.65% | 1.40% |
| HDFC Flexi Cap Direct | Flexi Cap | 0.75% | 1.50% |
| Quant Active Direct | Multi Cap | 0.60% | 1.80% |
| Mirae Asset Large Cap Direct | Large Cap Active | 0.55% | 1.45% |
TER verified May 2026. Updated monthly per SEBI mandate. Confirm at AMC website before investing.
How to check any fund's expense ratio
- AMC website (most authoritative): Go to the AMC's official site → search the fund → check "Scheme Information" section
- AMFI website (regulator): amfiindia.com → "Mutual Fund Industry" → "Scheme Details"
- Third-party aggregators: Moneycontrol / ValueResearch / ETMoney / Groww — all show TER on fund pages
- Your demat / MF platform: Zerodha Coin, Groww, MFCentral all display TER per scheme
The TER changes monthly based on AUM — always check the CURRENT TER, not the one quoted in old blog posts.
Direct vs Regular — the single biggest cost decision
The Regular plan TER includes 0.50-1.50% distributor commission. The Direct plan has zero distributor cost. Same fund, same manager, same portfolio — different cost structure.
| Aspect | Direct Plan | Regular Plan |
|---|---|---|
| Distributor commission | 0% | 0.50-1.50% |
| Typical TER (equity) | 0.60-1.00% | 1.30-2.00% |
| Same fund manager? | Yes | Yes |
| Same portfolio? | Yes | Yes |
| Same NAV? | No — Direct NAV is HIGHER (because lower expense) | Lower NAV |
| Where to buy | AMC website, Zerodha Coin, Groww (direct mode), MFCentral, Kuvera | HDFC Bank, ICICI Direct, traditional brokers, agents |
Switching from Regular to Direct triggers capital gains tax (treated as redemption + repurchase) but the cost is usually recovered within 1-2 years from the lower expense ratio. Use our Direct vs Regular calculator to model your specific scenario.
Don't forget: exit load + brokerage
The expense ratio is ANNUAL. Other costs to know:
- Exit load: 0.5-1.0% if you redeem within 1 year (most equity funds); 0% after 1 year
- STT (Securities Transaction Tax): 0.001% on redemption (equity funds only) — paid by AMC
- STCG / LTCG tax: 20% / 12.5% on equity gains (see our MF tax guide)
- Demat charges: ₹0 for AMC-direct accounts; ₹100-300/year if held in a demat account
For our complete mutual fund hub including SIP calculator + fund comparison + new fund offers, see /mutual-funds.
Sources: SEBI (Mutual Funds) Regulations 1996 — TER caps Regulation 52; AMFI Industry Data May 2026; S&P SPIVA India Scorecard FY 2024-25; AMC scheme information documents verified May 2026; Moneycontrol fund expense ratio database.
Frequently Asked Questions
What's a good expense ratio for an Indian mutual fund?
Depends on fund type: Index funds = ≤0.20% (great), 0.20-0.40% (acceptable), >0.40% (overpriced). Active equity funds direct plans = <1.0% (good), 1.0-1.5% (average), >1.5% (high). Active equity regular plans = <1.5% (good), 1.5-2.0% (average), >2.0% (high). Debt funds = <0.50% (good), 0.50-1.0% (average), >1.0% (high). Hybrid funds = 0.80-1.5% typical range. SEBI caps the maximum TER (Total Expense Ratio) at 2.25% for equity (regular) and 2.00% for debt — anything close to those caps is overpriced.
How does the expense ratio affect mutual fund returns?
Expense ratio is deducted DAILY from the fund's NAV before it's published — so investors never see the deduction directly. Over time, the cost compounds dramatically. Example: ₹10L invested for 20 years at 12% gross return — with 0.50% expense ratio, you get ₹86.5L. With 1.50% expense ratio, you get ₹73L. With 2.25% (SEBI cap), ₹64.5L. That's a ₹22L difference between low-cost and SEBI-cap-fee funds, on the same underlying investment. Switching from regular to direct plans (saving 0.50-1.50%) is the single highest-leverage MF decision most Indians can make.
Why is the regular plan expense ratio higher than direct plan?
Regular plans include distributor commission (also called 'trail commission') paid to the agent / advisor / broker who sold you the fund. This is built into the expense ratio — 0.50-1.50% additional cost per year vs the direct plan. SEBI introduced direct plans in 2013 specifically to eliminate this distribution cost for self-directed investors. If you bought your MF through HDFC Bank, ICICI Direct, an agent, or any platform that's NOT explicitly a direct platform (like AMC websites, MFCentral, Zerodha Coin, Groww direct), you're paying the regular plan TER.
How to find a mutual fund's expense ratio?
Three reliable sources: (1) AMC's official website — every fund page shows the current TER under 'Scheme Information'. (2) Moneycontrol, ValueResearch, ETMoney fund pages — display 'Expense Ratio' next to other fund stats. (3) AMFI website (amfiindia.com) → Scheme Details — shows the SEBI-mandated TER disclosure. The TER changes monthly (SEBI rules) based on the fund's AUM (Assets Under Management) — bigger funds get lower TER caps. Always check the current TER, not the one quoted in old articles.
Are index funds always cheaper than active funds?
Yes — by design. Index funds passively track a benchmark (Nifty 50, Sensex, Nifty Next 50) with minimal management — so they need minimal manager + research expenses. Average TER: 0.15-0.30% (direct) for Nifty 50 / Sensex index funds. Active equity funds need fund managers + analysts + research budgets — TER 0.50-1.50% (direct), 1.0-2.0% (regular). Over 15-20 years, the 80-150 basis point fee gap compounds into 25-40% more wealth for index investors — and most active funds underperform the index after fees (S&P SPIVA India report: 70-80% of active large-cap funds underperformed Nifty 50 over 10 years).
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