A disclosure first. I Tag Financials is a mutual fund distributor. We distribute regular plans and earn commission from asset management companies on them. That gives us an interest in this subject, so we have tried to set out both sides plainly. The choice is yours.
One scheme, two plans
Nearly every mutual fund scheme is offered in two plans.
- A regular plan is bought through a distributor.
- A direct plan is bought from the asset management company (AMC) itself, without a distributor.
Both plans belong to the same scheme. They have the same fund manager, the same portfolio, the same investment objective and the same risks. Money from both plans is invested together.
Where they differ
The difference is cost. The expense ratio of a regular plan includes the commission that the AMC pays to the distributor. The direct plan has no distributor commission, so its expense ratio is lower.
The expense ratio is deducted from the scheme’s assets every day, which means it shows up in the NAV. For this reason the two plans of the same scheme have different NAVs, and the direct plan’s NAV is the higher of the two. The gap between them tends to widen with time because the cost difference applies every year.
Everything else is the same: the holdings, the riskometer, the exit load structure and the scheme documents.
What the difference adds up to
A lower expense ratio means a little more of the scheme’s return stays with the investor each year. Over a short period the effect is small. Over many years it compounds and can become meaningful. How large it is depends on the scheme, the difference between the two expense ratios and how long you stay invested. Both expense ratios are published on the AMC’s website, so you can see the exact difference for any scheme you are considering.
Cost is a certain thing, while returns are not. That is the sound argument for paying attention to it.
What a regular plan pays for
The extra cost of a regular plan is the distributor’s remuneration. What you should receive in exchange is service:
- help in choosing schemes that are suitable for your goals, horizon and risk profile
- support with KYC, account opening and bank mandates
- help with transactions, statements and changes to your details
- someone to talk to when markets fall and the temptation to sell is strongest
Whether that is worth the cost depends on how much of it you would otherwise do yourself, and how well.
What a direct plan asks of you
A direct plan suits investors who are willing and able to do the work themselves. That means choosing schemes without a distributor, completing the paperwork, keeping track of holdings across fund houses, reviewing them periodically and staying disciplined during declines without anyone to call.
Investors who want personalised investment advice and prefer to pay for it separately can also engage a SEBI-registered Investment Adviser, who charges the client a fee and does not receive commission. That is a different service from distribution, and we do not provide it.
Questions to ask yourself
- Am I comfortable selecting schemes and reading scheme documents on my own?
- Will I review my investments regularly without being reminded?
- How have I behaved in past market falls, or how do I think I would?
- Do I value having a person to deal with for service and paperwork?
- Have I looked at the actual expense ratios of both plans for the schemes I am considering?
There is no single correct answer. Some investors hold direct plans for parts of their portfolio they manage themselves and use a distributor for the rest.
Moving from one plan to the other
You can move from a regular plan to a direct plan of the same scheme, or the other way. SEBI’s Master Circular for Mutual Funds dated 20 March 2026 (paragraph 11.7.3) states that exit load shall not be charged on a switch from the regular plan to the direct plan, or the other way, under the same scheme. A switch may have tax consequences; check with a tax professional before you move.
Moving to a different scheme is a separate matter: the exit load terms of the scheme apply.
How to know which plan you hold
Your account statement shows the plan name next to the scheme name, and it will say either Regular or Direct. A distributor’s ARN shown against the folio usually goes with a regular plan, but the plan name is what to rely on.
Whichever plan you choose, make sure it is a choice. A distributor should tell you that direct plans exist and what commission they receive. If you are not told, ask.