Mutual funds are permitted to charge certain operating expenses for managing a scheme – such as sales & marketing / advertising expenses, administrative expenses, transaction costs, investment management fees, registrar fees, custodian fees, audit fees – as a percentage of the fund's daily net assets.

All such costs for running and managing a mutual fund scheme are collectively referred to as ‘Total Expense Ratio' (TER).

While equity funds can charge up to 2.25 percent, non-equity schemes can charge up to 2 percent as base expense ratio.