The cost ladder
Every mutual fund deducts an annual charge, the total expense ratio (TER), from its NAV. You never see a bill; you see a slightly lower return. These are the median Direct-plan TERs by category, from AMFI's disclosures as of 4 October 2026, in order from cheapest.
| Category | Funds | Median TER (Direct) | Lowest | Highest | Median TER (Regular) |
|---|---|---|---|---|---|
| Liquid | 51 | 0.15% | 0.07% | 0.31% | 0.25% |
| Domestic fund of funds | 156 | 0.18% | 0.02% | 5.03% | 0.59% |
| Corporate Bond | 21 | 0.34% | 0.21% | 0.41% | 0.68% |
| Index funds | 382 | 0.37% | 0.05% | 8.18% | 0.96% |
| Gilt | 23 | 0.50% | 0.17% | 0.70% | 1.18% |
| Overseas fund of funds | 52 | 0.58% | 0.05% | 1.78% | 1.38% |
| Multi Asset | 37 | 0.85% | 0.45% | 2.30% | 2.15% |
| Small Cap | 36 | 0.90% | 0.52% | 1.93% | 2.06% |
| Flexi Cap | 46 | 0.91% | 0.55% | 2.80% | 2.19% |
| Mid Cap | 34 | 0.94% | 0.54% | 2.36% | 2.03% |
| Multi Cap | 33 | 0.97% | 0.67% | 4.86% | 2.21% |
| Balanced Advantage | 37 | 1.04% | 0.41% | 1.95% | 2.31% |
| Large Cap | 35 | 1.06% | 0.32% | 2.51% | 2.20% |
| Focused | 28 | 1.06% | 0.69% | 2.35% | 2.21% |
| Aggressive Hybrid | 29 | 1.07% | 0.63% | 2.10% | 2.23% |
| Large & Mid Cap | 36 | 1.08% | 0.65% | 2.34% | 2.30% |
| ELSS | 48 | 1.08% | 0.65% | 1.98% | 1.95% |
| Sectoral / Thematic | 256 | 1.15% | 0.52% | 4.78% | 2.39% |
| Value | 24 | 1.24% | 0.86% | 2.39% | 2.30% |
| Arbitrage | 40 | 1.44% | 0.99% | 2.48% | 2.07% |
The highest figures in index and fund-of-funds rows (8.18%, 5.03%) are outliers, not typical funds; the medians are the guide.
Index against active, like for like
Within the Index Funds category, the 25 Nifty 50 index funds have a median Direct TER of 0.25%, with a range of 0.10% to 0.86%. The other 357 index funds, tracking everything from midcaps to factor indices, have a median of 0.38%.
The median large-cap active fund charges 1.06%: 0.81 points more than the median Nifty 50 index fund. Mid-cap and small-cap active funds sit at 0.94% and 0.90%, which is about two and a half times the index median.
The gap is much bigger in Regular plans: the median large-cap Regular plan charges 2.20%, against 0.96% for the median Regular index fund.
What a cost gap does over 20 years
A worked illustration: ₹10,000 a month for 20 years, with an assumed 12% a year before costs. This is arithmetic, not a forecast, and it deducts the median TER from that assumed gross return.
| Fund | TER | Net return | Value after 10 years | After 20 years |
|---|---|---|---|---|
| No costs | 0% | 12.00% | ₹23.2 lakh | ₹99.9 lakh |
| Nifty 50 index (Direct) | 0.25% | 11.75% | ₹22.9 lakh | ₹96.6 lakh |
| Large-cap active (Direct) | 1.06% | 10.94% | ₹21.8 lakh | ₹86.7 lakh |
| Large-cap active (Regular) | 2.20% | 9.80% | ₹20.4 lakh | ₹74.6 lakh |
After 20 years the Direct active fund ends ₹9.9 lakh behind the index fund on identical gross returns. The Regular plan ends ₹22.0 lakh behind. After 10 years the gaps are small, ₹1.1 lakh and ₹2.5 lakh, which is why costs are easy to ignore early.
The assumption that makes this a fair fight is the one that real funds break. The active fund may earn more than the index before costs, or less. Our data on large-cap funds against index funds shows how that has gone.
Points to remember
- Debt funds are cheap, but yields are lower too. A median liquid fund's 0.15% and a corporate bond fund's 0.34% still come out of returns of a few percent a year, not double digits.
- The Direct plan is the cheaper twin. The Regular plan's extra cost pays a distributor's commission. See the Direct versus Regular expense gap.
- High-cost funds exist. The most expensive equity funds are listed in the highest expense ratio equity funds.
- The cheapest Nifty 50 index funds are compared in this post.
For your own numbers, the impact of 1 percent calculator shows what a cost difference does to a long SIP. This is not a recommendation to choose any fund.
Frequently asked questions
What is the typical expense ratio of an index fund in India?
On AMFI's disclosures of 4 October 2026, the median Direct-plan index fund charged 0.37% a year across 382 funds. The 25 Nifty 50 index funds had a median of 0.25%, ranging from 0.10% to 0.86%.
How much more do active equity funds charge?
The median Direct-plan large-cap fund charges 1.06% a year, mid-cap 0.94%, small-cap 0.90% and flexi-cap 0.91%. The Regular plans of the same categories have medians above 2%.
Does a lower expense ratio mean a better fund?
No. It means a smaller drag on returns. An active fund that earns more before costs can still win; an index fund is simply sure of keeping more of what its index earns.
This is commentary on published data, not investment advice. WealthTicker is not a SEBI-registered adviser or distributor. Figures are as of the dates stated and can be revised by their source.
Keep reading
Direct vs Regular plans: how 1.2% a year costs lakhs
A regular equity plan costs a median 1.2 points a year more than its direct twin. On a ₹10,000 SIP over 20 years, a gap that size is worth about ₹12 lakh.
Mutual fund factsheets: what normal looks like in 2026
A factsheet's numbers only mean something next to the fund's peers. Here is what each section shows, with the normal range for flexi-cap funds in 2026.
Are smart beta funds worth it? What the data shows
Factor index funds cost up to three times a Nifty 50 fund. Over three years to October 2026 most beat it, but momentum funds fell twice as far on the way.