Every mutual fund scheme runs one portfolio under one manager and sells it under two plans. The Regular plan is bought through a distributor and its annual expense ratio carries that distributor's trail commission. The Direct plan is bought straight from the fund house with no distributor in between, so it leaves the commission out and posts a lower expense ratio and its own higher NAV. SEBI made the Direct plan compulsory for every scheme through the circular titled Steps to re-energise Mutual Fund Industry, CIR/IMD/DF/21/2012 dated 13 September 2012, whose Para D took effect on 1 January 2013 and required a separate plan for investments not routed through a distributor. Everything else about the two plans is identical.
The gap between the two expense ratios is the distribution cost and nothing else. Measured across FinSet's own records of the AMFI expense-ratio filings as they stood on 13 July 2026, it is typically about 1.2 percentage points a year on actively managed equity funds, with the middle half of them between 0.9 and 1.4. It is around 0.45 percent on open-ended index funds and almost always under 0.2 percent on liquid and overnight funds. Every one of those figures is a snapshot of a moving set of filings rather than a fixed rate, so a figure dated to a different month will differ. That saving is real and it compounds, so an investor who sets an allocation and holds through a fall is well served by the Direct plan. The gap is also the price of advice, which makes the honest comparison not Regular against Direct but advised against unadvised. One avoided mistake, a panic exit in a drawdown or a rush into last year's winner, can cost several percent in a year and dwarf a fee measured in fractions of one. A Regular plan earns its keep when the guidance attached to it prevents that mistake.
On ₹1,00,000 held for a year in an active equity fund, a Regular plan at roughly 2.0 percent charges about ₹2,000 while the Direct plan of the same fund at roughly 0.8 percent charges about ₹800. The ₹1,200 difference is the distribution cost. Whether it counts as money saved or money well spent turns on whether advice prevents a costlier mistake over the same year.
Where It Shows Up #
Fund factsheets, AMFI disclosures and scheme pages carry a Regular and a Direct expense ratio and each plan has its own NAV. FinSet scheme pages show both expense ratios side by side, each dated to the AMFI disclosure it came from.
The Source #
SEBI, Steps to re-energise Mutual Fund Industry, Circular CIR/IMD/DF/21/2012, 13 September 2012 (Para D, separate plan for direct investments, effective 1 January 2013). The expense-ratio gaps quoted above are FinSet's own computation over AMFI's revised total-expense-ratio disclosures as filed to 13 July 2026, grouped by SEBI sub-category. AMFI republishes those disclosures monthly and fund houses refile through the month, so the figures move and any single reading is dated. Issuing authority.
Related on FinSet #
This entry is general education, not personal advice or a recommendation of any scheme. Mutual fund investments are subject to market risks. Read all scheme related documents carefully.