Key Facts
- SEBI required every fund house to offer a Direct Plan from 1 January 2013. It must have a lower expense ratio (the yearly fee a fund charges) and its own NAV (the price of one unit).
- Direct and regular plans of one scheme share the same portfolio and fund manager. Only the cost, and so the NAV, differs.
- As per AMFI and Crisil Intelligence data, direct plans held 36.7% of retail mutual fund assets in March 2026. The share was 21.4% in March 2021.
- Moving from a regular plan to a direct plan counts as a sale. It can trigger capital gains tax.
- In FY 2026-27, equity fund gains held over 12 months are taxed at 12.5% above ₹1.25 lakh a year. Gains on units held 12 months or less are taxed at 20%.
Last updated: 25 October 2026.
We are Deepak Wealth Framework, a mutual fund distributor in Pallikaranai, Chennai. We deal only in Regular Plans. So we earn a commission when you invest through us. You should know this before you read on. This guide gives you an honest comparison in plain words. It uses real rupee examples. You will see what each plan costs in rupees. You will also see who should pick which plan. Mutual fund investments are subject to market risks. This post is for education only.
How do direct and regular plans compare at a glance?
| Feature | Direct Plan | Regular Plan |
|---|---|---|
| Where you buy | Straight from the fund house or its website | Through a mutual fund distributor |
| Commission | None | Paid to the distributor from the plan’s expense ratio |
| Expense ratio | Lower | Higher |
| NAV | Higher, because costs are lower | Lower, because costs are higher |
| Portfolio and fund manager | Same as the regular plan | Same as the direct plan |
| Help you receive | None built in. You decide and act yourself. | Depends on your distributor |
| Best fit | Confident do-it-yourself investors | Investors who want guidance |
Deepak Gokul holds the Chartered Wealth Manager (CWM®) certification. He is NISM-Series-XVII: Retirement Adviser Certified. He is also an IRDAI Licensed Insurance Advisor. He has over 19 years of experience helping families plan their money. His firm, Deepak Wealth Framework Pvt Ltd, is AMFI Registered as a Mutual Fund Distributor. It serves clients in Chennai, across India, and Non-Resident Indian (NRI) clients abroad.
What is the difference between direct and regular mutual fund plans?
Every mutual fund scheme comes in two plans. You can buy a Direct Plan straight from the fund house, called the Asset Management Company (AMC). Or you can buy a Regular Plan through a distributor.
SEBI, the market regulator, asked fund houses to offer Direct Plans from 1 January 2013. Its circular of September 2012 said a Direct Plan must have a lower expense ratio. It must also have a separate NAV. The expense ratio is the yearly fee a fund charges, shown as a percentage of your money. NAV is the price of one unit of the fund.
A Regular Plan’s expense ratio includes the distributor’s commission. A Direct Plan pays no commission. The portfolio, the fund manager, and the goal of the scheme stay the same.
How much does the cost gap matter in rupees?
The gap between the two plans differs from fund to fund. It is often between 0.5% and 1.5% a year. Please check the exact figures on the fund house website before you decide.
Here is an example. Take a SIP of ₹10,000 a month for 20 years. A Systematic Investment Plan (SIP) means you invest a fixed amount every month. Assume the Direct Plan earns 12% a year after costs. Assume the Regular Plan earns 11% a year, because it costs 1% more.
In both cases you invest ₹24 lakh. The Direct Plan grows to about ₹91.99 lakh. The Regular Plan grows to about ₹81.56 lakh. The difference is about ₹10.43 lakh.
| Yearly cost gap | Regular plan ends lower by (10 years) | Regular plan ends lower by (20 years) |
|---|---|---|
| 0.5% | ₹0.59 lakh | ₹5.38 lakh |
| 1.0% | ₹1.16 lakh | ₹10.43 lakh |
| 1.5% | ₹1.72 lakh | ₹15.15 lakh |
Illustration only, not a forecast. SIP of ₹10,000 a month. Direct plan at 12% a year. Each instalment goes in at the start of the month. Real returns will differ.
So the real question is fair value. What do you get for that gap? The answer depends on the service you receive.
Why do many investors still choose regular plans?
Direct plans are growing fast. But regular plans still hold more money overall. As per AMFI and Crisil Intelligence data, direct plans had 45.1% of industry assets in March 2026. Regular plans had 54.9%.
Cost is only one part of your return. Behaviour is the other part. Research by Morningstar India and Axis Mutual Fund found that investors often earn less than the funds they own. They often chase last year’s winners and exit after a fall.
A good distributor helps you avoid these mistakes. But nobody can promise this. So judge any distributor by the service you actually get.
Who should choose a direct plan?
A direct plan suits you if you can do these things on your own:
- Compare funds and check their costs yourself.
- Review your portfolio at least once a year.
- Handle Know Your Customer (KYC) checks, nominee updates, and paperwork online.
- Stay invested when markets fall.
You can also pay for advice. A SEBI-registered Investment Adviser charges a fee and works with Direct Plans only. That is a separate route from using a distributor.
Who may do better with a regular plan?
- You are a first-time investor and want each step explained.
- You have several goals, such as child education, retirement, and a home.
- You are an NRI and need help with KYC and paperwork.
- You want a person to call when markets fall.
- Your family wants all investments reviewed in one place.
But a regular plan is worth its cost only if the distributor delivers. Ask what you will receive each year. Ask who you can call. Ask how they are paid.
What do we recommend to Chennai families?
We deal only in Regular Plans. So we cannot offer you Direct Plans. We will not pretend the cost gap does not exist.
If you are a confident do-it-yourself investor, a Direct Plan is the cheaper route. If you want help, please judge us on what we do. We aim to build a plan around your goals. We aim to set up your SIPs and review them with you every year. We aim to be there when markets fall.
Is it worth switching from a regular plan to a direct plan?
A switch is not free of tax. The fund house treats it as a sale of your regular plan units. It then treats it as a fresh purchase of direct plan units. Any gain becomes taxable on that day.
For equity funds in FY 2026-27, gains on units held 12 months or less are taxed at 20%. Gains on units held longer are taxed at 12.5% above ₹1.25 lakh a year. Budget 2026 did not change these rates.
SEBI has removed exit load on plan-to-plan switches within the same scheme. Please verify this in your fund house’s latest notice. Tax-saving ELSS units stay locked for three years.
So check your gains first. Then compare the tax with the yearly saving. You can also switch in parts over several years. That lets you use the ₹1.25 lakh limit each year.
What changed under SEBI’s 2026 mutual fund rules?
The SEBI (Mutual Funds) Regulations, 2026 took effect on 1 April 2026. Total expense ratio now has four parts. These are the base expense ratio, brokerage, regulatory levies, and statutory levies such as GST and Securities Transaction Tax (STT).
SEBI also cut the highest base expense ratio for open-ended equity schemes below ₹500 crore. It fell from 2.25% to 2.10%. Direct plans still cost less than regular plans. So compare the same figures when you check two plans.
Frequently asked questions about direct and regular mutual funds
What is the main difference between direct and regular mutual funds?
The main difference is cost. Both plans hold the same portfolio and use the same fund manager. A regular plan pays a commission to a distributor, so it has a higher expense ratio. A direct plan pays no commission, so it has a lower expense ratio and a higher NAV. You buy a direct plan straight from the fund house.
How much cheaper is a direct plan than a regular plan?
The gap differs from fund to fund. It is often between 0.5% and 1.5% a year. Take a SIP of ₹10,000 a month for 20 years. A 1% yearly gap means about ₹10.43 lakh less at the end, in our example. Please check each scheme’s current expense ratio on the fund house website.
Do direct and regular plans give the same returns?
No. They hold the same investments, but the regular plan has higher costs. So its NAV grows a little slower. The direct plan usually earns more by about the size of the cost gap. Past returns do not promise future returns. Both plans carry the same market risk.
Is switching from a regular plan to a direct plan taxable?
Yes. A switch counts as a sale of regular plan units and a fresh purchase of direct plan units. In FY 2026-27, equity fund gains on units held 12 months or less are taxed at 20%. Gains on longer holdings are taxed at 12.5% above ₹1.25 lakh a year. Check your gains before you switch.
Which plan suits a first-time investor in Chennai?
It depends on you, not on the plan. If you can pick funds and stay calm in a market fall, a direct plan costs less. If you want help with goals, SIPs, and yearly reviews, a regular plan includes a distributor’s guidance. Compare the cost with the service you will actually receive.
Why does Deepak Wealth Framework deal only in regular plans?
We are an AMFI Registered Mutual Fund Distributor. Distributors earn commission only on regular plans. So we deal in regular plans, and we earn commission on them. A direct plan option is also available to every investor. It has a lower expense ratio, and we do not earn commission on it. We want you to know this before you invest.
Did SEBI’s 2026 rules end the difference between direct and regular plans?
No. The SEBI (Mutual Funds) Regulations, 2026 took effect on 1 April 2026. They changed how expenses are shown and capped. Direct plans still pay no distributor commission. So they still cost less than regular plans of the same scheme. Please check each scheme’s latest expense ratio on the fund house website.
Related resources
Not sure which plan fits your goals? Tell us about your family and your goals. We will explain the cost, the tax, and your choices in plain words.
Book a consultation or call +91 91763 40301 or +91 99402 47435.
Deepak Gokul specialises in goal-based financial planning, child education planning, SIP investments, mutual fund advisory, and retirement planning for families across the globe. With his Chartered Wealth Manager (CWM®) certification and specialised training in retirement advisory, Deepak helps clients build long-term wealth through structured, disciplined financial planning.
The figures in this post are illustrations, not forecasts or promises of returns.
Deepak Wealth Framework Pvt Ltd is an AMFI-registered Mutual Fund Distributor, ARN-328771. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.