The Securities and Exchange Board of India (Sebi) has changed how mutual fund expenses are disclosed by introducing the base expense ratio (BER). Sebi approved the change on December 17, 2025, under the new Sebi (Mutual Funds) Regulations, 2026.
Previously, investors kept a track of their mutual fund expenses through the total expense ratio (TER), which combined fund management fees with taxes and statutory charges, such as goods and services tax (GST) and securities transactions tax (STT). This made it difficult for investors to see what fund houses actually charged. In contrast, BER includes only the core expenses of running a mutual fund scheme, and statutory charges are disclosed separately.
What Is Included In BER?
5 February 2026
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It will exclude all statutory and regulatory charges, including GST, STT, commodity transaction tax (CTT), stamp duty, Sebi fees and exchange charges.
Statutory charges will be on actual expenses incurred by the fund house, over and above the permissible brokerage limits.
In essence, BER captures the essential annual operating cost of a mutual fund, such as fund management fees, distributor commissions and registrar and transfer agent (RTA) charges.
Overall cost borne by investors will now be calculated as the sum of BER, brokerage cost, and regulatory and statutory levies.
BER of fund of funds (FoFs) shall not exceed twice the weighted average of the BER levied by the underlying scheme.
What Are The Changes In Expense Limits?
Sebi has reduced expense limits by up to 15 basis points (bps), with most asset slabs seeing a cut of around 10 bps.
For equity schemes with assets under management (AUM) of up to Rs 500 crore, the maximum charge is down from 2.25 per cent to 2.10 per cent. For debt schemes in the same AUM bracket, they are at 1.85 per cent, against 2 per cent earlier.
BER for index funds and exchange-traded funds (ETFs) are down from 1 per cent to 0.90 per cent. Similar reductions have been applied for FoFs, larger AUM slabs and closed-end schemes.
Over long investment periods, these seemingly small reductions can translate into significantly higher wealth creation without taking additional risk.
Difference Between BER And TER
BER is what fund houses charge to operate and manage a scheme. TER represents the final cost paid by investors after statutory and regulatory levies are added to BER.
Earlier, TER presented all costs as a single figure, blurring the line between what the fund house charged and what investors paid as taxes.
The new framework separates controllable fund costs from taxes and levies that are outside the fund house’s control.
Separation of costs brings greater transparency to mutual fund pricing and allows investors to see what they are paying for fund management and what goes towards taxes and statutory levies. This helps them compare schemes leading to more informed fund selection.
