Direct vs Regular Mutual Funds

A regular plan is the direct plan plus a commission

In 2013 SEBI made every fund house offer two plans of every scheme:

• Direct plan. You buy from the fund house directly, or through a platform that takes no commission from the fund. You pay the fund's own costs and nothing else.
• Regular plan. You buy through a distributor: a bank relationship manager, an agent, or an app that earns commission. The fund house pays that person a trail commission every year, taken from the scheme's assets. The regular plan's expense ratio is higher by exactly that amount.

Same portfolio, same fund manager, same day's trades. The two plans have different NAVs only because the regular plan's NAV has had a larger fee taken out of it every day since launch.

For an actively managed equity fund, the gap is usually 0.6–1.2 percentage points a year. For index funds it is smaller, often 0.2–0.5, because the fee being marked up is smaller.

What the gap costs, in rupees

• Direct plan, 0.5% a year₹93.4 L₹24 lakh paid in.
• Regular plan, 1.5% a year₹81.8 LSame fund, same manager, same shares.
• What the commission took₹11.6 LNearly half of everything you paid in, spent on a salesperson you may never speak to again.

12% a year before costs, compounded monthly. Direct plan at 0.5% a year, regular plan at 1.5%. Most active equity funds fall close to that 1-point gap; check your own fund's factsheet.

Run the direct plan in the SIP calculator, then try 10.5% →

That is 12.5% of the final corpus. It is not a one-time charge you can forget. Because the fee is a percentage, it grows with your money: in the twentieth year alone, the extra 1% takes about ₹77,000.

• Direct plan₹88.2 L
• Regular plan₹73.7 L
• What the commission took₹14.5 LMore than the entire ₹10 lakh you invested, taken 1% at a time.

Same assumptions as above. A lump sum loses more than a SIP because all of the money is exposed to the fee from day one.

Run the lump sum in the compound interest calculator →

Every half-point of fee takes about 6% of what you end up with

The same ₹10,000 a month for 20 years, at 12% a year before costs. With no fee at all it grows to ₹99.9 lakh. Only the expense ratio changes from row to row.

At 2.1% the fee takes ₹24.3 lakh, more than the ₹24 lakh you paid in. It is quoted as a small percentage each year, but it compounds against you for exactly as long as your money compounds for you.

Two rules follow. Compare expense ratios only within a category: a liquid fund and a small-cap fund cost different amounts to run. And read published returns as already net of fees. The NAV has the expense ratio taken out, so don't subtract it a second time.

Check which plan you own in two minutes

1. Look at the scheme name. Direct plans say "Direct" in the name, for example "Parag Parikh Flexi Cap Fund – Direct Plan – Growth". If the name says "Regular", or says neither, assume regular.
2. Download your Consolidated Account Statement (CAS) from CAMS or KFintech using your PAN. Each folio shows either "Direct" or a distributor's ARN code. An ARN code means someone is being paid.
3. Compare the expense ratio on the fund's factsheet. The regular plan's figure will be higher. That difference is the commission.

Any app that sells direct plans is good enough

The difference between the best-designed investing app and an adequate one is worth very little over twenty years. Whether it sells direct plans is worth ₹11.6 lakh on a ₹10,000 SIP. Settle that first. The rest is preference, and four checks cover it:

• What it costs. Most platforms that sell direct plans are free. A few charge a flat fee. ₹1,000 a year is 0.1% of a ₹10 lakh portfolio and 1% of a ₹1 lakh one, so a flat fee suits large portfolios and punishes small ones.
• A capital gains statement in one click. You need one every July for your tax return.
• Importing funds you bought elsewhere. Most platforms read your CAS, so you see one portfolio instead of four.
• How hard it pushes. An app whose home screen leads with "top performing" funds and new fund offers is built for your activity, not your returns.

Your units are not held by the app

When you buy a fund, the units are recorded against your PAN by the fund house's registrar, CAMS or KFintech. The app only places the order. If it shuts down, is sold or is barred by a regulator, your units are untouched. You can see and redeem them on the fund house's website, through CAMS or KFintech, or on MF Central, which covers every fund house. You are choosing a remote control, not a vault.

You don't need a broker or a demat account to hold them either. Buying mutual funds without a demat account covers the routes.

Switching to direct without a tax bill

Moving from regular to direct, even within the same scheme, counts as selling one fund and buying another. You may owe capital gains tax and an exit load. Do it in this order:

1. Stop new money going to regularCancel the regular-plan SIPs and start the same amount in the direct plan of the same fund. This costs nothing and fixes every future rupee.
2. Find your long-term unitsIn your CAS or on the fund's website, check which units are more than 12 months old. Only those should move now.
3. Move up to ₹1.25 lakh of gains a yearLong-term gains up to ₹1.25 lakh a year are tax-free. Redeem that much from the regular plan and invest it in the direct plan the same day.
4. Repeat each year until doneLarger portfolios may take a few years to move without tax. The commission you stop paying usually outweighs any tax you choose to pay to go faster.

Units bought in the last twelve months can wait. Selling them now would mean 20% short-term tax and usually a 1% exit load, which is more than one extra year of regular-plan commission costs you.

Fund fees are capped, and the cap changed in April 2026

SEBI's Mutual Fund Regulations 2026 took effect on 1 April 2026. The fund house's own charge is now shown as a base expense ratio (BER), capped at 2.10% a year for an equity fund's first ₹500 crore of assets and lower above that. Statutory charges such as GST, STT and stamp duty are now shown separately instead of being included in the headline figure.

The rule that matters here has not changed. The regular plan still costs more by the amount of the distributor's commission, and you can still choose not to pay it.

Questions people actually ask