If you recently checked the expense ratio of a mutual fund, you may have noticed a new term: Base Expense Ratio or BER. Until recently, most investors were mainly familiar with the Total Expense Ratio or TER.

Under the SEBI (Mutual Funds) Regulations, 2026, which came into force on April 1, 2026, the expense-ratio framework has been reorganised. Expense-ratio limits are now expressed as Base Expense Ratio limits, while statutory levies, brokerage and transaction-related costs are separately identified.

This does not mean mutual funds have introduced an additional fee. Instead, BER and TER represent different parts of a fund’s costs.

Understanding BER vs TER can help investors compare mutual funds more effectively and understand how fund expenses affect their investment returns. If you are new to mutual funds, you can start by learning what mutual funds are and how they work before exploring the different costs involved.

What Is Base Expense Ratio or BER?

The Base Expense Ratio (BER) is the portion of a mutual fund’s expenses that covers the basic cost of managing and operating the scheme.

It can include expenses such as:

Investment management and advisory fees
Fund administration expenses
Registrar and transfer-agent costs
Custodian expenses
Marketing and distribution expenses, where applicable
Investor communication expenses
Certain operating expenses of the scheme

The important change under the 2026 framework is that statutory levies are excluded from the BER limits.

In simple terms, BER tells you the base cost of running the mutual fund before certain transaction-related and statutory costs are added.

What Is Total Expense Ratio or TER?

The Total Expense Ratio (TER) represents the total expenses charged to a mutual fund scheme relative to its assets.

Under the new framework:

TER = BER + Brokerage Cost + Transaction Cost + Statutory Levies

Statutory levies can include charges such as GST, Securities Transaction Tax or Commodity Transaction Tax where applicable, stamp duty, SEBI fees and exchange-related levies.

Therefore, TER gives investors a broader picture of the costs ultimately borne by the scheme, while BER covers the base operating expenses.

BER vs TER: What Is the Difference?

The easiest way to understand BER vs TER is through this comparison:

Basis	BER	TER
Full form	Base Expense Ratio	Total Expense Ratio
What it represents	Base cost of operating the mutual fund	Overall expenses charged to the scheme
Management expenses	Included	Included through BER
Distribution expenses	Included where applicable	Included through BER
Brokerage	Separate	Included
Transaction costs	Separate	Included
Statutory levies	Excluded	Included
Usually higher or lower?	Usually lower	Usually higher than BER
Useful for	Comparing basic operating cost	Understanding total scheme expenses

The most important point is that BER should not be compared directly with an older TER number without understanding what each figure includes.

A lower-looking BER does not automatically mean the fund has suddenly become much cheaper.

Why Did SEBI Introduce the BER Framework?

Previously, regulatory expense limits included certain statutory levies. This could make it difficult to separate the costs controlled by an Asset Management Company from taxes and regulatory charges that the AMC does not control.

The revised framework separates these components.

This makes it easier to distinguish between:

Fund operating costs: Expenses linked to managing and administering the scheme.

Trading costs: Brokerage and transaction expenses created when the fund buys or sells securities.

Government and regulatory charges: Taxes and statutory levies applicable to those expenses or transactions.

This can give investors a clearer picture of where their mutual fund costs are coming from.

Have Mutual Fund Expense Ratio Limits Changed?

Yes. SEBI revised the expense-ratio limits while moving to the BER framework.

For open-ended equity-oriented schemes, the BER limits begin at 2.10% on the first ₹500 crore of daily net assets. For non-equity-oriented schemes, the corresponding BER limit is 1.85%.

The regulatory limits reduce as the scheme’s assets become larger.

For example:

Daily Net Assets Slab	Equity-Oriented BER Limit	Non-Equity BER Limit
First ₹500 crore	2.10%	1.85%
Next ₹250 crore	1.90%	1.65%
Next ₹1,250 crore	1.60%	1.40%
Next ₹3,000 crore	1.50%	1.25%
Next ₹5,000 crore	1.40%	1.15%
Above ₹50,000 crore	0.95%	0.70%

Between ₹10,000 crore and ₹50,000 crore, the permitted ratio declines progressively as AUM increases.

These are maximum regulatory limits, not necessarily what every mutual fund will charge. A fund may charge less.

Have Mutual Fund Expense Ratio Limits Changed?

Yes. SEBI revised the expense-ratio limits while moving to the BER framework.

For open-ended equity-oriented schemes, the BER limits begin at 2.10% on the first ₹500 crore of daily net assets. For non-equity-oriented schemes, the corresponding BER limit is 1.85%.

The regulatory limits reduce as the scheme’s assets become larger.

For example:

Daily Net Assets Slab	Equity-Oriented BER Limit	Non-Equity BER Limit
First ₹500 crore	2.10%	1.85%
Next ₹250 crore	1.90%	1.65%
Next ₹1,250 crore	1.60%	1.40%
Next ₹3,000 crore	1.50%	1.25%
Next ₹5,000 crore	1.40%	1.15%
Above ₹50,000 crore	0.95%	0.70%

Between ₹10,000 crore and ₹50,000 crore, the permitted ratio declines progressively as AUM increases.

These are maximum regulatory limits, not necessarily what every mutual fund will charge. A fund may charge less.

Does a Lower BER Mean Your Mutual Fund Has Become Cheaper?

Not necessarily.

Suppose a mutual fund previously displayed a TER of 1.50%. Under the new structure, you might see a BER of 1.35%.

At first glance, this may look like your cost has fallen by 0.15 percentage points.

But imagine the fund also incurs:

Brokerage: 0.03%
Transaction costs: 0.02%
Statutory levies: 0.08%

The total expense would be:

TER = 1.35% + 0.03% + 0.02% + 0.08%

TER = 1.48%

The BER is 1.35%, but the total expense borne by the scheme is 1.48%.

This is why investors should avoid comparing an old TER directly with a new BER.

The correct comparison would be TER versus TER, or alternatively comparing the individual expense components between funds.

How Do Mutual Fund Expenses Affect Your Returns?

Expense ratios matter because fund expenses are deducted from the scheme’s assets.

You generally do not receive a separate bill asking you to pay the expense ratio. The expenses are reflected in the mutual fund’s NAV, meaning the returns investors see are already after accounting for applicable scheme expenses.

Consider two funds that generate the same gross return of 10%.

Assume:

Fund A TER: 1.0%
Fund B TER: 1.8%

Ignoring other factors for illustration, the return after expenses would be roughly:

Fund A: 9%
Fund B: 8.2%

A difference of 0.8 percentage points may appear small in one year, but over longer periods, the effect compounds.

Suppose ₹5 lakh grows at 10% annually before expenses for 15 years.

At an approximate 9% return after expenses, it would grow to about ₹18.2 lakh.

At an approximate 8.2% return after expenses, it would grow to about ₹16.3 lakh.

The difference is around ₹1.9 lakh.

Actual mutual fund returns will vary, and expenses may change over time, but the example shows why expense ratios matter to long-term investors.

The effect of costs becomes more visible over longer investment periods because returns compound over time. This is particularly relevant for investors building wealth through regular investments. If you invest periodically, understanding how SIPs in mutual funds work can help you see how long-term investing and compounding work together.

What Changed for Brokerage Costs?

SEBI also revised how brokerage costs are treated.

For cash-market transactions, brokerage charged separately to a scheme is capped at 0.06% of trade value. For derivative transactions, the corresponding limit is 0.02%.

Brokerage expenses above these permitted levels must fall within the BER limit.

This distinction is particularly relevant for actively managed schemes where portfolio turnover may result in more trading activity.

BER vs TER in Direct and Regular Mutual Fund Plans

The difference between direct and regular plans continues under the BER framework.

A regular plan may include distribution-related commissions and expenses because investors invest through intermediaries or distributors, while direct plans do not carry these distributor commissions. You can read more about the distinction in our guide on Direct vs Regular Mutual Funds.

As a result, the Base Expense Ratio of a direct plan should generally be lower than that of the corresponding regular plan.

For example:

Expense Component	Regular Plan	Direct Plan
Fund operating costs	0.70%	0.70%
Distribution expense	0.40%	Nil
BER	1.10%	0.70%

This difference can affect long-term returns, although investors should also consider whether they require advisory or distribution assistance before choosing between direct and regular plans.

What Should Investors Check Now?

The introduction of BER makes it important to look beyond the first expense-ratio number displayed on an investment platform.

1. Check whether the number shown is BER or TER

Some investment platforms may display BER prominently while the AMC or AMFI website provides the complete TER breakdown.

2. Compare like with like

Do not compare one fund’s BER with another fund’s TER.

Compare:

BER vs BER, or preferably TER vs TER.

3. Look at direct and regular plans separately

Two plans of the same scheme can have different expense ratios because regular plans include distribution-related costs.

4. Do not select funds only on expenses

A lower expense ratio can help returns, but it should not be the only factor used to select a mutual fund.

Consider the fund’s investment objective, risk level, portfolio, consistency, benchmark, fund category and suitability for your investment horizon. Investors should also understand the different types of mutual funds, since equity, debt and hybrid funds have different objectives and risk profiles.

5. Check the latest figures

Expense ratios are not permanently fixed. They can change depending on the scheme’s AUM and the AMC’s pricing decisions.

Investors should check the latest scheme-level expense disclosures before comparing funds.

Advantages of the New BER Structure

The revised expense framework can make mutual fund costs easier to understand.

It provides better visibility into what part of a scheme’s expense comes from the AMC’s operating costs and what part comes from statutory or transaction charges.

It can also help investors separately assess BER, brokerage, transaction costs and statutory levies instead of treating everything as one figure.

What Investors Should Be Careful About

The main risk is misunderstanding the new terminology.

An investor might see a BER of 0.90% and assume that the fund’s total expense is 0.90%. However, once brokerage, transaction costs and statutory levies are included, TER can be higher.

Similarly, a decline from an older expense-ratio limit to a lower BER limit does not necessarily mean investors receive the full difference as a cost saving.

For this reason, TER remains important when investors want to understand the fund’s overall cost.

BER vs TER: Which One Should Investors Focus On?

Both numbers are useful, but they answer different questions.

Use BER when you want to understand the underlying operating expense charged by the mutual fund.

Use TER when you want to understand the overall cost charged to the scheme after adding brokerage, transaction costs and applicable statutory levies.

When comparing how expensive two mutual funds are for an investor, TER is generally the more complete figure.

BER, however, can help explain why those costs differ.

Expense ratios are also only one part of the overall cost picture. Taxes may affect the amount an investor finally receives when units are redeemed. You can refer to our guide on Mutual Fund Taxation in India to understand how capital gains and other mutual fund income may be taxed.

Conclusion

The introduction of Base Expense Ratio changes the way mutual fund expenses are classified and disclosed rather than creating a new fee for investors.

Under the new framework:

BER represents the fund’s base operating expenses, while TER combines BER with brokerage, transaction costs and statutory levies.

In simple terms:

TER = BER + Brokerage + Transaction Costs + Statutory Levies

For investors, the biggest takeaway is simple: do not assume that the BER displayed by a platform represents your mutual fund’s complete expense ratio.

Check the TER and its individual components when comparing schemes. Even small differences in expenses can affect long-term returns when investments remain compounded over many years.