Is Your Fund Manager Hiding Costs? How SEBI’s New ‘Unbundled’ Rules Change Your Bill from April 1

India’s mutual fund industry is bracing for a change in how it bills its 40 million investors. Starting April 1, 2026, the Securities and Exchange Board of India (SEBI) will enforce a strict unbundling of the Total Expense Ratio (TER), effectively stripping away the "black box" pricing that has governed the sector for decades.

The new mandate, part of the SEBI (Mutual Funds) Regulations, 2025, requires fund houses to move from a single, all-inclusive fee to an itemized billing structure. This change aims to provide investors with a line-by-line look at exactly where their money goes, from the fund manager's fee to the taxes paid to the government.

The End of the All-In Fee

Currently, an investor paying a 1.5% expense ratio often remains unaware of how that percentage is split between management expertise and administrative costs. Under the new unbundled regime, this single figure is being dismantled into four distinct categories:

• Base Expense Ratio (BER): This is the core management and advisory fee. For the first time, SEBI has proposed a performance-linked component here, hence allowing funds to charge slightly more only if they consistently beat their benchmarks.
• Brokerage and Transaction Costs: Previously hidden within the TER, these are now capped at 6 basis points (0.06%) for cash market trades. This prevents fund houses from over-trading simply to generate commissions for preferred brokers.
• Statutory Levies: Goods and Services Tax (GST), Securities Transaction Tax (STT), and stamp duty will now be charged on actuals and listed separately.
• Regulatory Fees: Payments made to SEBI and the stock exchanges will no longer be buried in the management fee.

The move comes as the Indian mutual fund industry manages over ₹68 trillion in assets, with a massive surge in retail participation through Systematic Investment Plans (SIPs). "The goal is to ensure that the investor knows if they are paying for a manager’s skill or simply for the government's taxes," a senior SEBI official noted during the 212th Board Meeting.

By separating taxes and brokerage from the management fee, SEBI is forcing fund houses to be more competitive. Lower-cost products like Index Funds and ETFs are expected to see the most significant "optical" drop in fees, with some direct plans potentially showing a Base Expense Ratio as low as 0.15% to 0.20%.

The Challenge for Fund Managers

Unbundling will put pressure on "Active" fund managers who have struggled to outperform their benchmarks. With the fees now transparently displayed, investors can easily compare the "Base Fee" across different AMC (Asset Management Company) platforms. The transparency is expected to trigger a fee war among the top 10 fund houses, thus ultimately benefiting the long-term wealth creation of the average Indian household.

Also read: Is the OTP Dead? How RBI’s April 1 Rules Will Change Your UPI Payments