Smart Equity Invest

Direct vs Regular Mutual Funds

Every mutual fund comes in two versions that own exactly the same shares. One of them pays a salesperson out of your money every day for as long as you hold it.

Figures checked · How we calculate

₹11.6Lwhat a regular plan costs on a ₹10,000 SIP over 20 years

You invest ₹24 lakh of your own money. In the direct plan it grows to ₹93.4 lakh. In the regular plan of the same fund, with the same manager and the same shares, it grows to ₹81.8 lakh.

The ₹11.6 lakh difference went to a distributor as trail commission, a little every day for twenty years. It never appears as a line on your statement.

A regular plan is the direct plan plus a commission

In 2013 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 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 has had a larger fee taken out of it every day since launch.

For an actively managed 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

₹10,000 a month for 20 years, the same fund in two plans
  • 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.

₹10 lakh invested once, left for 20 years
  • 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 →

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.

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 . 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, 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

Figures on this page assume a 12% annual return before costs, compounded monthly. That is in line with long-run Indian equity history, but it is not a forecast. The 0.5% and 1.5% expense ratios are round figures typical of active equity funds. Tax rates are those in force for FY 2026-27, plus 4% cess.