Total Expense Ratio

Somebody has to pay the fund manager, the registrar, the custodian, the auditor, the trustees and the distributor. In a mutual fund all of it is charged to the scheme, accrued every day, and taken out before the NAV is struck. No bill ever reaches the investor, which is exactly why the number deserves attention.

TER is not a single capped percentage. Chapter 5 gives the formula the AMC must disclose against:

The slab table everyone memorises caps only the first of those four. That is the base expense ratio — the investment and advisory fees, out-of-pocket expenses and brokerage commission the scheme is allowed to bear. Brokerage cost, execution transaction cost and statutory levies sit on top of it and are disclosed in their own columns.

So a scheme whose BER limit works out to 1.56% does not charge its investors 1.56%. It charges 1.56% plus whatever the other three columns come to.

Start with the base expense ratio. For an open-ended scheme that is not a fund of funds, index fund or ETF, the base limits run:

The slabs are marginal, like income tax. A large scheme does not drop to the bottom rate on its whole corpus; each tranche is charged at its own rate and the effective base ratio is the blend. Separate ceilings apply elsewhere: 0.90% for an index fund or ETF; 0.90% for a fund of funds investing in liquid schemes, index funds and ETFs; 2.10% for a fund of funds putting at least 65% into equity-oriented schemes; 1.85% for other funds of funds. Close-ended and interval schemes are capped at 1.00% if equity-oriented and 0.80% otherwise. Anything above the base limits is borne by the AMC, trustees or sponsor — never by the scheme.

Then add the other three columns. Brokerage and transaction cost for executing trades may be charged up to 0.06% of trade value on cash market transactions and 0.02% on derivatives transactions — note that these caps are percentages of trade value, not of net assets, so what they add to TER depends on how much the scheme trades. Statutory levies are the fourth column: GST on investment management and advisory fees is charged to the scheme in addition to the limits, while GST on every other fee must fit within them, and GST on exit load is deducted from the exit load with the net credited back to the scheme.

Nothing else may reach the investor. Beyond base expense ratio, brokerage cost, transaction cost, statutory levy and exit load, no charge may be levied.

TER = Base Expense Ratio (BER)
    + Brokerage cost
    + Transaction cost incurred for the purpose of execution of trade
    + Statutory levies (including GST)

What sits inside the first term:

BER = investment and advisory fees
    + out-of-pocket expenses
    + brokerage commission

      (excluding statutory levy on those expenses,
       and excluding transaction cost)

And the slab arithmetic, which caps the BER alone:

BER limit = Σ (assets in each slab × that slab's rate)
            ÷ Total daily net assets

An equity-oriented open-ended scheme runs daily net assets of Rs 6,500 crore. Work down the slabs:

BER limit = 101.25 ÷ 6,500 = 1.56% per annum

That is the base expense ratio limit, not the TER. The scheme may bear Rs 101.25 crore of base expenses, not Rs 136.50 crore (which 2.10% flat would have allowed) — the slab structure bites by Rs 35 crore a year.

Now build the disclosed TER. Say the scheme turns over enough to trade Rs 9,750 crore of cash-market value in the year. At the 0.06% cap that is Rs 5.85 crore, or 0.09% of net assets:

The workbook's own footnote to Table 5.1 records the GST rate as "XX%", so a question that wants the fourth column will hand you the rate. What it will not do is let you stop at 1.56%.

What this costs one investor: on a holding of Rs 8,00,000, the base ratio alone is about Rs 12,480 a year, and the brokerage and transaction columns add roughly Rs 720 before levies — all deducted a day at a time, visible only as an NAV that grows slightly more slowly. Had the same money sat in an index fund, whose base ratio is capped at 0.90%, the base charge would be about Rs 7,200, a gap of Rs 5,280 every year that compounds for as long as the investor stays.

Chapter 5 (Scheme Related Information), section 5.1.6, gives the TER formula and the disclosure format at Table 5.1, whose footnotes cite Regulation 66(7) of the SEBI (Mutual Funds) Regulations, 2026 for the base expense ratio, 66(9) for brokerage cost and 66(10) for transaction cost. Chapter 7 section 7.2.4 carries the slab table, and Chapter 8 section 8.9 the GST treatment. Questions come in four shapes: the base limit for a scheme of a stated size and type, the components that make up TER, which expenses may and may not be charged to the scheme, and who bears expenditure above the limits.

• The slab table caps the base expense ratio, not the TER. TER is BER plus brokerage cost, transaction cost and statutory levies including GST. Answering a components question with the slab figure alone understates what the investor pays.
• The slabs are marginal, not a single rate. A Rs 6,500 crore equity scheme is not charged 1.40% on everything.
• The 0.06% and 0.02% caps are percentages of trade value, not of net assets. How much they add depends on the scheme's turnover.
• Index funds and ETFs are capped at 0.90% regardless of size — the slab table does not apply to them at all.
• GST splits two ways. GST on investment management and advisory fees is charged in addition to the limits; GST on every other fee must fit within them.
• Excess expenditure is borne by the AMC, trustees or sponsor, not passed to unitholders.
• Exit load is not part of TER. It is credited back to the scheme and is not available to the AMC for selling expenses; GST on it is deducted from the load itself.
• TER is already inside the NAV. A scheme's published return is net of it, so you never subtract it again from a stated return.
• A change in BER needs at least three working days’ notice to investors by email or SMS, and on the website. See Base Expense Ratio for that mechanism in full.
• AMCs must disclose TER scheme-wise and date-wise, daily, on their own website and on AMFI’s, in a downloadable, machine-readable spreadsheet.