What is the expense ratio?
Running a mutual fund costs money: fund managers and analysts have to be paid, the registrar keeps the records, the custodian holds the securities, and distributors are compensated in some plan types. The AMC recovers all of it by charging a small percentage of the fund’s assets every year. That percentage is the expense ratio, also called the Total Expense Ratio or TER.
You are never invoiced for it. The charge is accrued daily and taken out of the fund’s assets before the NAV is published, so the NAV you see is already net of cost. That makes the expense ratio easy to overlook and, because it is charged every year whether the fund gains or loses, one of the few things about a fund you can know with certainty in advance.
Expense Ratio = Total annual fund expenses / Average assets under management × 100
Lower is better, all else equal. A 1% expense ratio means ₹1 of every ₹100 of fund assets goes to costs each year.
Real comparison across 6 funds
The chart sets each fund’s direct-plan expense ratio against the average for all funds in its own category, so the comparison is like for like.
CHART
Direct-plan expense ratio (%) vs category average - 6 real funds
Category averages are computed across every direct-plan fund in that category in the Punji database.
Funds compared: Parag Parikh Flexi Cap · DSP Value · ICICI Prudential Value · SBI Focused · Parag Parikh ELSS Tax Saver · SBI Multicap
Among these funds the direct-plan expense ratio ranges from 0.65% (Parag Parikh ELSS Tax Saver) to 1.55% (DSP Value). Within a single category the gap can be wide: the value fund category runs from 0.86% to 2.39% across 24 funds, with an average of 1.31%.
What it costs in rupees
On a ₹10,00,000 holding, a 0.65% expense ratio costs about ₹6,500 a year, while 1.55% costs about ₹15,500 a year. Over ten years that is roughly ₹65,000 against ₹1,55,000 before any compounding, and in practice the gap is larger because money paid in fees is no longer invested and growing. These are simple multiplications of the expense ratios above, not a forecast of returns.
Direct plans versus regular plans
Every scheme is offered in a Direct plan and a Regular plan. The Regular plan includes a distributor commission inside its expense ratio, so it is always higher than the Direct plan of the same scheme, with an identical portfolio and manager. The figures on this page are Direct-plan Total Expense Ratios. See Direct vs Regular Plan for the cost gap in the same six schemes.
Base expense ratio versus total expense ratio
AMFI now reports the expense ratio in parts: the base expense ratio, which is the fee for managing the scheme, plus brokerage, transaction costs and statutory levies including GST. These add up to the Total Expense Ratio, which is the figure deducted from the fund’s assets and the one used on this page. When you see two different numbers for the same fund, check whether one is the base ratio and the other is the total.
Where the expense ratio fits in fund selection
A lower expense ratio is a guaranteed saving, but it is not a reason to pick a fund by itself. An active fund has to earn back its fee through Alpha, meaning return above its benchmark. For a passive fund, cost is nearly the whole story, because the fund can only track its index minus fees, which is why Tracking Error and the expense ratio are read together. Compare expense ratios within the same category and plan type, since an index fund and a small-cap fund have very different cost structures.
WHAT THIS MEANS FOR YOU Always check which plan type an expense ratio refers to before comparing two funds. A Regular-plan figure set against a Direct-plan figure makes the second look far cheaper than it really is relative to the first. Also remember that the expense ratio is only one cost: exit loads and taxes are separate, and a cheap fund that consistently lags its benchmark is still the more expensive choice.
METHODOLOGY Direct-plan Total Expense Ratios pulled from the Punji fund database on 2026-10-25; the six fund figures match AMFI’s 30 Sep 2026 TER disclosure. Category averages cover every direct-plan fund with a reported expense ratio in the category. Rupee figures are simple arithmetic on those ratios. Not investment advice.