Why your mutual fund TER may look higher in 2026 and what it actually means

It’s completely natural to have questions when something like this changes. So, here’s the most important thing to know upfront:

• Your cost of investing has not increased
• Only the way these costs are presented has changed

This shift follows SEBI’s updated mutual fund disclosure framework (March 2026), which is designed to give investors a clearer and more standardized view of fund expenses.

What is TER and what changed in 2026?

The Total Expense Ratio (TER) represents the total cost of managing and operating a mutual fund scheme, expressed as a percentage of assets.

Updated TER Formula (as per SEBI)

TER = Base Expense Ratio (BER)
    + Brokerage Costs
    + Transaction Costs
    + Statutory Levies (including GST)

As per SEBI’s Master Circular (Chapter 11: Loads, Fees, Charges and Expenses), asset management companies are required to:

• Disclose TER daily (scheme-wise, date-wise)
• Present it in a machine-readable format (Excel)
• Clearly identify all material cost components

This results in a more comprehensive and standardized measure of fund expenses.

TER vs BER: Understanding the difference

A key concept in this transition is the distinction between:

• Base Expense Ratio (BER)
• Total Expense Ratio (TER)

Think of it this way:

• BER = Cost of running the fund
• TER = Total cost of owning the fund

Illustration: TER vs BER

What this shows:

• BER reflects core operating expenses
• TER reflects the full economic cost, including trading and statutory components

Earlier, some of these costs were part of the NAV calculation but not disclosed within TER. The updated approach provides a complete view in one number.

Why TER may appear higher or fluctuate

1. Inclusion effect: More complete visibility

Some costs like brokerage, taxes, and statutory levies have always been part of how a fund operates. The difference is that earlier, they were not included in the TER that investors saw. It was directly accounted in NAVs.

Now that these costs are part of the disclosed TER:

1. The number may appear higher
2. But there is no change in what you are actually paying

2. Annualisation effect: Why temporary spikes happen

A second effect investors may notice is day-to-day fluctuation in TER, including occasional spikes.

This is driven by how certain costs are annualised for reporting purposes.

What does “annualisation” mean?

Annualisation means that a cost incurred on a single day is projected as if it were applied across the entire year on the current assets under management (AUM).

How this impacts TER:

• Trading costs and statutory levies arise only when the fund executes transactions
• When such a cost occurs, it is spread across 365 days for reporting consistency
• This can temporarily make TER appear elevated on that day

The expense is still a one-time event. The spike is a result of how the number is expressed and not a change in underlying cost. In simple terms, a one-day cost can be reflected as if it were spread across the entire year, which can temporarily make the TER look higher.

What SEBI aims to achieve

The revised TER framework reflects three key priorities:

Transparency

A single, all-in figure that captures the full cost of managing a scheme

Comparability

Standardized disclosure across funds enables better investor comparison

Accountability

• Daily disclosure requirements
• Machine-readable reporting formats
• Detailed breakdowns for material expenses

What this means for you

Despite the changes in how TER is presented:

• Your investment costs remain unchanged
• Your NAV already reflected all these expenses earlier
• There are no new charges introduced

Bottom line:

If you’re looking for a more comparable view of core fund costs, it can be useful to look at the Base Expense Ratio (BER), as it reflects the ongoing cost of managing the fund without the impact of trading-related fluctuations.

Frequently asked questions

Why did TER increase after April 2026?

Because TER now includes transaction costs and statutory levies that were earlier excluded from its disclosure.

Why does TER fluctuate daily now?

Because trading-related costs are included and annualised, which can create temporary spikes on days when transactions occur.

Is a higher TER now a concern?

Not necessarily. It may simply reflect more complete disclosure, not higher actual cost.

Should I take any action?

No action is required. This is a reporting enhancement, not a pricing change.

Our perspective at JioBlackRock Mutual Fund

We believe that clarity builds confidence.

The enhanced TER framework is a meaningful step towards helping investors better understand the complete cost of investing presented simply, transparently, and consistently.