There was much uproar of my yesterday’s post on Insurance Premium Charges and received comments to write a blog on Mutual Fund Charges.
Here are my excerpts:
Asset Management Companies charge certain fees on schemes held by investor. The AMC manages the fund portfolio, monitor market fluctuations and makes investment decisions.
To Manage funds Professionally costs are incurred such as Advisory Fees, Operational Costs, Investment Management Fees, Registrar & Transfer Agent Fees, Legal & Audit Fees, Agent Commissions & Ongoing Service Charge. All these charges are termed as Total Expense Ratio (TER).
- Total Expense Ratio (TER)
SEBI has specified the limit as follows
| Average AUM | Equity | Debt |
| 1st 100 Crores | 2.50% | 2.25% |
| Next 300 Crores | 2.25% | 2% |
| Next 300 Crores | 2% | 1.75% |
| Balance | 1.75% |
1.50% |
- Transaction Charges
There are no Transaction Charges for investment less than Rs. 10000. The charge is only levied to investment of more than Rs. 10000. New Investor- Rs. 150 deducted from his investment spread over equally for 4 months. Existing Investor- Rs.100 deducted from his investment spread over equally for 4 months.
- Entry Load
There are No Entry Charges for Investment in Mutual Funds.
- Exit Load
This fee is levied to discourage investors who opt out of the scheme. Different AMC’s charge different exit loads. Generally, exit load in Equity Scheme is 1% before completion of 365 days and 1% in Debt Scheme before completion of 3 yrs.
- Taxation
- STCG: If any investor withdraws the invested amount before completion of 1 year, the profit generated on the invested amount is taxed by 15% known as Short Term Capital Gains.
- LTCG: If any investor withdraws the invested amount after completion of 1 year, the profit generated on the invested amount will be taxed by 10% known as Long Term Capital Gains. (This rule will start on 27th March 2018)
Till then, any investor can book profits & utilise the amount for further investments.
Artharthi 