Mutual Fund Direct Plans : Important Update from 1 November 2026

Mutual fund direct plans are expected to become the default option on the digital platforms of asset management companies from 1 November 2026, according to an announcement by SEBI Chairman Tuhin Kanta Pandey.

The development could make investors more aware of the difference between direct and regular plans, especially when starting a systematic investment plan, or SIP, through a mutual fund house’s website or app.

At an event on 28 October 2026, the SEBI Chairman said investors selecting regular plans would be informed about their higher expenses. This article is based on that announcement and subsequent reporting; investors should check the applicable implementation instructions and their AMC’s platform for the final position.

What is a mutual fund direct plans ?

A direct plan allows an investor to invest in a mutual fund scheme without routing the investment through a distributor. A regular plan is generally purchased through a mutual fund distributor. The distributor may provide services such as product information, transaction support and ongoing assistance.

Both plans belong to the same underlying scheme. They generally have the same investment portfolio, fund manager and investment objective. The principal difference is the expense structure.

• Direct plan: invested directly with the fund house or through an eligible direct-plan platform; distributor commission is not included in its expense ratio, which is generally lower.

• Regular plan: generally routed through a distributor; distribution expenses are included in the plan’s expenses, which are generally higher. Both plans have separately calculated NAVs.

For investors who need help understanding investment goals and available routes, our mutual fund and SIP services provide a useful starting point.

What is expected to change from 1 November?

Based on the SEBI Chairman’s announcement, direct plans are expected to appear as the default choice on AMC digital platforms from 1 November 2026. Investors who choose a regular plan are expected to receive information about its higher expense ratio.

The announced change concerns the default choice on mutual fund houses’ digital platforms. It should not be interpreted to mean that regular plans are being discontinued or that every existing SIP will automatically change to a direct plan. A default is also not a personalised recommendation. An investor should still examine whether the scheme itself matches their goals and risk tolerance.

Why does the expense ratio matter?

A mutual fund’s expense ratio represents recurring expenses charged to the scheme. A higher expense ratio can reduce the return ultimately reflected in an investor’s investment value.

For illustration, assume that two plans have the same underlying portfolio and that one plan’s annual expense ratio is 0.5 percentage point higher. If all other factors remained equal, the lower-cost plan could retain more value over time. The actual difference will vary with the scheme, expense ratios, investment period and market performance. Lower cost does not eliminate investment risk or guarantee a positive return.

Should existing investors switch immediately?

A switch from a regular plan to a direct plan generally involves redemption from one plan and investment in the other. Before switching, review capital gains tax based on scheme type, holding period and applicable law; any exit load; the services received from the distributor; whether the underlying scheme remains suitable; and how the existing SIP instruction will be handled.

Investors can discuss the tax and reporting implications through income tax return filing services, particularly where several redemptions or switches are involved.

Direct plan or regular plan: Which should you choose?

There is no single answer for every investor. A direct plan may suit an investor who can independently select and review schemes, understand risk and maintain discipline. A regular plan may be considered by an investor who values distributor support and understands the associated cost. The important question is whether the scheme, service and cost together are appropriate for the investor’s needs.

Frequently Asked Questions

1. Are direct and regular plans different mutual fund schemes? They are different plans of the same scheme and generally share the same portfolio and fund manager. Their expense ratios and NAVs differ.

2. Will my existing regular-plan SIP automatically become a direct-plan SIP? The reported announcement concerns the default option on AMC digital platforms. It does not establish an automatic conversion of existing SIPs.

3. Do direct plans guarantee better returns? No. Direct plans generally have lower expenses, but returns remain market-linked and depend on the scheme’s performance.

4. Is switching from a regular plan to a direct plan taxable? A switch generally involves redemption and may give rise to capital gains or losses. The tax treatment depends on the facts and applicable law.

Conclusion

The expected default option makes it a good time to review how you invest and what you pay. However, choosing a suitable mutual fund and maintaining an appropriate investment horizon remain just as important as choosing between direct and regular plans.

Sources: NDTV Profit report on the SEBI Chairman’s announcement and Business Standard investor explainer.