Quick Summary
- SEBI's new Mutual Fund Regulations 2026 took effect April 1, 2026, replacing the old 1996 rulebook.
- The single Total Expense Ratio (TER) is now broken into three visible parts: Base Expense Ratio (BER), brokerage, and statutory levies (STT, GST, stamp duty).
- The Base Expense Ratio cap for index funds/ETFs was cut to 0.9% from 1.0%; close-ended equity schemes see their cap cut to 1% from 1.25%.
- Analysts caution the actual cost savings are modest (roughly 5-15 bps depending on the fund) since levies that were bundled before are now itemised separately, not eliminated.
- A new performance-linked BER option lets some schemes tie part of their fee to how the fund performs, subject to SEBI conditions.
SEBI's overhauled Mutual Fund Regulations, effective April 1, 2026, split the expense ratio into three visible parts. Here's what changed, and why analysts say it's about transparency more than your fund getting meaningfully cheaper.
What changed
SEBI's new Mutual Fund Regulations, 2026 came into effect on April 1, 2026, replacing the regulations that had governed the industry since 1996. The headline change for everyday investors is how your fund's cost is disclosed: instead of one bundled Total Expense Ratio (TER) figure, your statement now shows three separate components:
- Base Expense Ratio (BER) — the actual cost of running the scheme, i.e., the AMC's management fee
- Brokerage — what the fund pays to execute trades
- Statutory and regulatory levies — STT, GST, stamp duty and similar charges
Under the old framework, statutory levies were often bundled inside the TER ceiling. Under the new one, the Base Expense Ratio excludes them — they're itemised and charged on top, up to permitted limits.
Did costs actually come down?
Partially, and the industry's own commentary is candid about this not being a sharp cut. Reported changes to the Base Expense Ratio cap include a reduction to 0.9% from 1.0% for index funds and ETFs, and to 1% from 1.25% for close-ended equity schemes. Brokerage caps for derivative transactions by mutual funds were revised to 2 basis points, excluding statutory levies.
But because statutory levies are now charged separately rather than folded into the old ceiling, the combined cost an investor actually pays can end up close to what it was before. As one analyst put it in Outlook Money's coverage, the shift is about clearer disclosure, not a guaranteed discount — don't expect your fund to suddenly get 20-30 bps cheaper just because the rulebook changed.
A caveat on the exact brokerage figures: some secondary sources cite a cash-market brokerage cap around 6 bps (down from roughly 12 bps), but we weren't able to confirm this specific number against SEBI's primary circular text, so treat it as indicative rather than exact. For precise, scheme-specific numbers, check your fund's latest factsheet or the SEBI Master Circular (issued March 20, 2026) directly.
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The new performance-linked option
One genuinely new feature: SEBI now permits a Base Expense Ratio structure that can be linked to a scheme's performance, subject to conditions the regulator has specified. In principle, this could mean paying less when a fund underperforms its benchmark and more when it beats it — but adoption is up to individual AMCs, and as of this writing it's early days for how widely this gets used.
Other changes in the overhaul
Beyond expense ratios, the new regulations also rationalised sponsor eligibility norms (who can set up an AMC), streamlined the respective roles of AMCs and trustees, and relaxed some compliance requirements by allowing digital communication in place of physical processes.
What should you actually do about this?
Nothing drastic. This isn't a reason to switch funds or stop a SIP — it's a disclosure change more than a cost-cutting one. The practical takeaway is that your statements will now look different (three line items instead of one), and it's worth glancing at the Base Expense Ratio specifically when comparing similar funds, since that's now the cleanest apples-to-apples cost figure between schemes.
Frequently Asked Questions
Frequently Asked Questions
Will my mutual fund get cheaper because of this rule change?
Possibly marginally, but don't expect a big drop. The Base Expense Ratio cap was cut for some categories, but statutory levies that used to be bundled in are now charged separately, so the total cost you pay can end up similar to before.
Do I need to do anything because of this change?
No action is required. This is a disclosure and structural change to how costs are itemised, not something that requires you to switch funds or alter your SIPs.
What is the Base Expense Ratio (BER)?
It's the new name for the AMC's actual management fee, now shown separately from brokerage and statutory levies (STT, GST, stamp duty) instead of being bundled into one Total Expense Ratio figure.
When did these new SEBI mutual fund rules take effect?
April 1, 2026. The SEBI Master Circular incorporating these changes was issued on March 20, 2026.
Sources
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