12:08 PM IST – Most investors believe mutual fund returns depend only on the market. But what many don’t realise is that costs quietly decide how much money actually reaches your pocket after all charges and taxes.
In its recent board meeting, the Securities and Exchange Board of India approved the Mutual Fund Regulations, 2026, replacing the old 1996 rules. A 30-year rule applies when there is no internet or smartphones. a move that may not look dramatic, but directly benefits Indian SIP investors over the long term, as noted in the official SEBI Board Meeting document.
Unlike big headline announcements, this change works silently. And that’s exactly why it matters.
What SEBI Really Changed
Earlier, most mutual fund expenses were shown as one combined number called the expense ratio. Investors knew the total cost but without knowing how much went into fund management, brokerage, or taxes.
Now, SEBI has:
- Cleanly separated base fund expenses from brokerage and statutory charges
- Tightened limits on how much AMCs can spend on trading
- Removed extra “temporary” charges that quietly stayed for years
The result: lower effective costs, especially for long-term investors.
SEBI didn’t promise higher returns. Instead, it stopped unnecessary money leakage.
What This Means for Expense Ratios
After the rationalisation:
- As per the 1996 regulations, the average equity mutual fund expense ratio is around 1.20–1.30%
- Post-change effective expense ratio: ~1.00–1.05% (2026)
The annual difference looks small on paper. Over long periods, it compounds into a meaningful amount.
Let’s take a normal tier 1 or tier 2 city Indian SIP investor.
Investment Details
- Monthly SIP: ₹10,000
- Investment period: 15 years
- Expected market return before costs: 12% per year
- Total invested amount: ₹18 lakh
Earlier Cost Structure
- Expense ratio: 1.25%
- Net annual return: ~10.75%
- Final corpus after 15 years: ~₹34.5 lakh
After Cost Reduction
- Expense ratio: ~1.05%
- Net annual return: ~10.95%
- Final corpus after 15 years: ~₹36.0 lakh
Net Impact
₹1–1.5 lakh extra wealth, without increasing SIP amount or risk.
Same SIP. Same market cycles. Only cost efficiency improves.
Then, Why Are Investors Angry on Social Media?
Over the last few days, social media platforms like YouTube and X are full of angry comments from investors saying, “Nothing changed in mutual funds,” “Only tax has increased,” and “SEBI changes don’t help common people.”
So what is the truth? The answer is between short-term frustration and long-term reality.
This is the part many finance sites avoid. Let’s be honest.
1. “Only GST Increased” Feeling
GST on mutual fund expenses is 18%, and that has not been reduced.
Earlier, GST was often bundled inside the expense ratio, so investors didn’t notice it clearly. Now, many apps and statements show GST more transparently.
This visibility is being misunderstood as a new or higher tax, even though GST existed earlier, too.
In simple words: Tax feels higher because it is now clearly visible.
2. Taxes Hurt Immediately, Savings Feel Slow
Cost reduction works:
- Slowly
- Quietly
- Over long periods
Taxes, on the other hand:
- Are paid immediately
- Reduce current returns
- Feel pain instantly
So investors emotionally react more to visible tax outflow than invisible cost savings.
3. No Immediate Impact on NAV
Expense cuts do not suddenly push NAV up.
Many investors expect:
- Instant gain
- One-day visible benefit
But cost savings work through compounding, not headlines. This makes people say, “Nothing changed.”
4. Short-Term Investors Don’t Feel the Benefit
If someone:
- Invests for 1–2 years
- Frequently switches funds
The benefit of lower expenses is almost invisible.
These rules mainly reward:
- SIP investors
- Long-term holders
- Index fund investors
That’s why reactions are divided.
What SEBI Did Right — And What It Didn’t
Positives
- Lower long-term costs
- Better transparency
- Less unnecessary trading
- More money stays with investors
What SEBI Did NOT Fix
- Taxes
- Short-term volatility
- Instant returns
- Investor emotions
SEBI improved the structure, not the experience.
Bottom Line for Indian Investors
Costs feel invisible. Taxes feel real. But 1 one-line truth:
SEBI’s new mutual fund rules not make you rich faster but they just make sure less of your money quietly disappears.
For SIP investors thinking 10–20 years ahead, this is a meaningful and permanent improvement. For any newbie or short-term investors, it may genuinely feel like nothing changed.
And both views can exist — at the same time.
