{"id":12263,"date":"2026-05-22T13:39:31","date_gmt":"2026-05-22T13:39:31","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/total-expense-ratio-ter\/"},"modified":"2026-05-22T13:39:31","modified_gmt":"2026-05-22T13:39:31","slug":"total-expense-ratio-ter","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/total-expense-ratio-ter\/","title":{"rendered":"Total Expense Ratio (TER)"},"content":{"rendered":"<p>The <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/expense-ratio\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Expense Ratio<\/a> of a <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/mutual-fund\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">mutual fund<\/a> is the annual fee charged by the asset management company (AMC) to manage your money. Expressed as a percentage of the fund&rsquo;s <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/assets\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>assets<\/a> under management, it covers fund management fees, marketing, administration, and other <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/operating-expenses\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">operating expenses<\/a>. Even small differences in expe<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/nse\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>nse<\/a> ratio compound into large differences in long-term returns. Indian investors should understand expense ratio before buying any fund.<\/p>\n<div><strong>Key takeaways:<\/strong>\n<ul>\n<li>Expense ratio is the annual percentage fee charged by the AMC.<\/li>\n<li>Deducted from the fund&rsquo;s <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/nav\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>NAV<\/a> daily &mdash; you do not see a separate charge.<\/li>\n<li>Direct plans have lower expense ratios than regular plans (no commission to distributors).<\/li>\n<li><a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/sebi\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>SEBI<\/a> caps expense ratios by fund category and AUM size.<\/li>\n<li>A 1% difference in expense ratio can erode lakhs over a 20-year <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/sip\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>SIP<\/a>.<\/li>\n<\/ul>\n<\/div>\n<h2 id=\"how-expense-ratio-impacts-returns\">How expense ratio impacts returns<\/h2>\n<p>If a fund delivers a gross return of 13% and has an expense ratio of 2%, your net return is roughly 11%. Compounded over 20 years on &#x20B9;10,000 monthly SIP, that 2% drag costs around &#x20B9;20&#x2013;25 lakh in foregone gains compared to a fund with 1% expense ratio delivering the same gross return.<\/p>\n<h2 id=\"what-it-covers\">What it covers<\/h2>\n<ul>\n<li>Fund management fee &#x2014; paid to the AMC.<\/li>\n<li>Trustee fee &#x2014; paid to the fund&#x2019;s trustees.<\/li>\n<li>Registrar and transfer agent fees.<\/li>\n<li>Marketing and distribution costs (only in regular plans).<\/li>\n<li>Custodian fees, audit costs, legal <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/expense\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">expenses<\/a>.<\/li>\n<\/ul>\n<h2 id=\"direct-vs-regular-plans\">Direct vs Regular plans<\/h2>\n<table>\n<tr>\n<th><\/th>\n<th>Direct Plan<\/th>\n<th>Regular Plan<\/th>\n<\/tr>\n<tr>\n<td>Expense ratio<\/td>\n<td>Lower (0.5%&#x2013;1.5% typical)<\/td>\n<td>Higher (1.5%&#x2013;2.5% typical)<\/td>\n<\/tr>\n<tr>\n<td>Distributor commission<\/td>\n<td>None<\/td>\n<td>Embedded<\/td>\n<\/tr>\n<tr>\n<td>Available via<\/td>\n<td>AMC, <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/broker\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>broker<\/a> direct portal, online platforms<\/td>\n<td>Advisors, banks, distributors<\/td>\n<\/tr>\n<\/table>\n<h2 id=\"sebi-caps-and-current-limits\">SEBI caps and current limits<\/h2>\n<p>SEBI sets maximum expense ratios for mutual funds based on fund category (<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/equity\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>equity<\/a>, debt, hybrid) and slabs of AUM. Equity schemes generally have higher caps than debt schemes. ETF and <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/index\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>index<\/a> fund expense ratios are typically much lower (around 0.1%&ndash;0.5%) because they require less active management.<\/p>\n<h2 id=\"how-to-check-expense-ratio\">How to check expense ratio<\/h2>\n<ul>\n<li>Listed on the fund factsheet, monthly.<\/li>\n<li>Available on AMC websites and aggregator platforms.<\/li>\n<li>Lemonn shows expense ratio alongside other fund metrics.<\/li>\n<li>Tracked over time &#x2014; many funds adjust expense ratios as AUM grows.<\/li>\n<\/ul>\n<h2 id=\"beyond-expense-ratio\">Beyond expense ratio<\/h2>\n<p>While expense ratio is critical, it is not the only fee. Be aware of <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/exit-load\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">exit load<\/a>s (for early redemptions), STT on equity transactions inside the fund, <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/gst\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>GST<\/a> on management fees, and stamp duty (a tiny one-time charge). Considering total cost of ownership helps you compare funds fairly.<\/p>\n<h2 id=\"frequently-asked-questions\">Frequently asked questions<\/h2>\n<div>\n<h3 id=\"is-the-expense-ratio-charged-on-top-of-nav\">Is the expense ratio charged on top of NAV?<\/h3>\n<p>No. It is deducted daily from the fund&#x2019;s NAV, so what you see is already net.<\/p>\n<h3 id=\"why-do-regular-plans-cost-more\">Why do regular plans cost more?<\/h3>\n<p>They embed commissions paid to advisors and distributors.<\/p>\n<h3 id=\"are-index-funds-cheaper\">Are index funds cheaper?<\/h3>\n<p>Yes. Passive funds usually have expense ratios under 0.5%, much lower than actively managed equity funds.<\/p>\n<h3 id=\"should-i-always-pick-the-lowest-expense-ratio\">Should I always pick the lowest expense ratio?<\/h3>\n<p>It is a strong factor, but pair it with rolling returns, fund category, and manager quality before deciding.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>The Expense Ratio of a mutual fund is the annual fee charged by the asset management company (AMC) to manage your money. Expressed as a percentage of the fund&#x2019;s assets under management, it covers fund management fees, marketing, administration, and other operating expenses. Even small differences in expense ratio compound into large differences in long-term [&#x2026;]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-12263","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Ashutosh","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"The Expense Ratio of a mutual fund is the annual fee charged by the asset management company (AMC) to manage your money. Expressed as a percentage of the fund&#x2019;s assets under management, it covers fund management fees, marketing, administration, and other operating expenses. Even small differences in expense ratio compound into large differences in long-term&hellip;","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12263","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/12263\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=12263"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}