Direct Vs Regular Mutual Funds: Difference & Which is Better

Published on March 18, 2026 | 5 min read

In January 2013, the Securities and Exchange Board of India (SEBI)introduced direct plans for mutual funds (MF), allowing investors to invest directly with the fund house without intermediaries. Direct and regular plans are not different funds, they are simply two ways to invest in the same mutual fund scheme.

India’s mutual fund industry has grown rapidly. As per the Association of Mutual Funds of India (AMFI) BY early 2026, the industry’s AUM crossed ₹81–82 lakh crore . Systematic Investment Plans (SIPs) are a major driver, with monthly contributions reaching ₹31,002 crore in December 2025 and about 9.79 crore SIP accounts, reflecting the rise of disciplined, retail investing

Understanding the difference between direct and regular plans is important for choosing the investment mode based on cost, advice needs and discipline.

The Same Fund, Two Investment Routes

Direct plan

Invest directly with the asset management company (AMC) or platforms like MF Utilities or fintech apps such as Upstox. No distributor commission is paid, lowering the expense ratio.

Regular plan

Invest via intermediaries such as AMFI-registered distributors, bank relationship managers or brokerages. These intermediaries earn a commission, usually 0.1%–1.5% annually, which is included in the fund’s expense ratio.

What is a Regular Mutual Fund Plan?

Regular plans involve intermediaries like distributors, brokers or bank relationship managers who help investors buy mutual funds. These intermediaries may offer services such as,

Financial planning guidance
Goal-based investing advice
Asset allocation strategies
Support during market volatility The commission of these intermediaries gets included in expense ratio. Regular plans include the distributor commission in the expense ratio, making them slightly costlier than direct plans. SEBI caps the expense ratio for equity funds at about 2.25 percent.

Open FREE Demat Account within minutes!

Join now

What is a Direct Mutual Fund Plan?

Direct plans allow investors to bypass intermediaries, investing straight with the AMC or via platforms like Upstox.

No commission is paid to intermediaries
Lower expense ratio means cost savings are reinvested daily
Over time, the compounding effect results in slightly higher NAV and long-term returns Example of compounding effect - Investing ₹10,000/month for 10 years with a 1% lower expense ratio can lead to ~5–7% higher corpus at the end of the period, assuming 12% annual returns.

Cost Difference Between Direct and Regular Plans

Fund Type	Direct Plan Cost	Regular Plan Cost	Typical Gap
Large Cap Funds	0.80–1.20%	1.50–2.00%	~0.7–0.8%
Mid Cap Funds	0.70–1.10%	1.60–2.25%	~1.0–1.3%
Flexi Cap Funds	0.75–1.20%	1.50–2.00%	~0.8–1.0%
ELSS Funds	0.70–1.10%	1.50–2.00%	~0.8–1.0%
Index Funds	0.05–0.20%	0.30–0.50%	~0.2–0.35%
Liquid Funds	0.10–0.25%	0.25–0.50%	~0.15–0.30%

Even a 1% annual difference in expense ratio can significantly impact long-term wealth due to compounding.

Why Direct Plan NAV is Higher

Direct plans often show a higher Net Asset Value (NAV) than regular plans because the savings from distributor commissions are reinvested daily. Over time, this leads to slightly higher corpus, even though the underlying portfolio is identical.

Role of Distributors vs Registered Investment Advisers (RIA)

Distributors offer advice and portfolio guidance, but quality varies. Some only process transactions without meaningful advice. RIAs are SEBI-registered advisers who,

Cannot earn mutual fund commissions
Charge a direct advisory fee (usually 0.25%–1% of AUM) Currently, India has ~1000 SEBI-registered RIAs, so access remains limited. Investors using RIAs invest via direct plans, paying separately for advice.

Who Should Choose Direct vs Regular Plans

Investor Type	Prefer	Reasoning
Beginner	Regular plan	Access to guidance and support
DIY / Experienced investor	Direct plan	Lower costs, manage portfolio independently
High corpus (>₹50 lakh)	Direct plan	Small cost savings compound significantly
Goal-oriented investors	Regular plan	Advice helps with disciplined investing
Cost-conscious long-term investor	Direct plan	Maximises returns via lower expense ratios

How to Invest

Open account on AMC website, MFU, or a fintech platform.
Select the mutual fund scheme and choose Direct or Regular plan.
Complete KYC verification if not already done.
Choose investment mode: Lump sum or SIP.
Authorise payment through bank mandate or UPI.
Track NAV and portfolio regularly.

Common Mistakes Investors Make

Choosing regular plans for cost reasons alone without assessing advisor quality. Ignoring expense ratio impact on long-term returns. Switching plans without considering capital gains tax.

Tax Section (as per Budget 2025–26)

For Equity Mutual Funds, short-term capital gains (STCG) on investments held for less than 12 months are taxed at 15%. Long-term capital gains (LTCG) on investments held for more than 12 months are taxed at 10% on gains exceeding ₹1 lakh. For Debt Mutual Funds, STCG is taxed according to the investor’s applicable income tax slab, while LTCG on investments held for more than 36 months is taxed at 20% with indexation benefits. Switching from a regular plan to a direct plan is treated as a redemption followed by a fresh investment, which triggers applicable capital gains tax. Investors should consult a tax advisor to optimise tax implications based on their holding period and overall portfolio.

FAQs

1. Do direct and regular plans invest in different stocks?

No. Both plans hold the same portfolio of securities, managed by the same fund manager. Only the cost structure differs.

2. Can direct mutual funds give higher returns?

Yes, over the long term, lower expenses in direct plans compound to produce slightly higher returns, typically 0.5%–1% annually.

3. Can I switch from regular to direct plans?

Yes, but it involves redeeming the regular plan and buying the direct plan, which may trigger capital gains tax.

4. How can I check if my mutual fund is direct or regular?

Check your mutual fund statement, CAS statement, or investment platform. The scheme name usually specifies 'Direct Plan' or 'Regular Plan'.

5. Is a regular mutual fund plan bad?

Not necessarily. Regular plans can provide professional advice and support, valuable for beginners or investors seeking guidance.

About Author

Pradnya Surana

Sub-Editor

is an engineering and management graduate with 12 years of experience in India’s leading banks. With a natural flair for writing and a passion for all things finance, she reinvented herself as a financial writer. Her work reflects her ability to view the industry from both sides of the table, the financial service provider and the consumer. Experience in fast paced consumer facing roles adds depth, clarity and relevance to her writing.