A member of our WhatsApp community recently shared his portfolio statement. He'd been investing ₹10,000 monthly for eight years through his bank's wealth manager.
When we checked, he was in regular plans across all funds. The hidden cost? Over ₹1.8 lakhs in commissions he never knew he paid.
At Belong, we see this pattern constantly. NRIs unknowingly lose lakhs because nobody explained the direct vs regular choice clearly.
This guide will show you exactly what you're paying, what you're getting, and which option actually makes sense for your situation.
What's the Actual Difference?
Both direct and regular plans invest in the same stocks, bonds, and securities. Same fund manager. Same strategy. Same portfolio. The only difference is how you buy them.
Direct Plans: You invest directly through the AMC (Asset Management Company) website or platforms like MF Central. No intermediary involved.
Regular Plans: You invest through a distributor, bank relationship manager, or financial advisor. They earn a commission from the AMC for bringing your business.
That commission doesn't come from thin air. It's baked into the fund's expense ratio, which means lower returns for you.
How Much Does This Commission Actually Cost?
According to ACE MF data from April 2025, the expense ratio difference between direct and regular plans ranges from 0.30% to 1.90% annually for equity schemes.
Here's what that looks like in real numbers:
Fund Type | Direct Expense Ratio | Regular Expense Ratio | Annual Difference |
|---|---|---|---|
Large Cap Equity | 0.5-0.8% | 1.2-1.8% | 0.7-1.0% |
Mid/Small Cap | 0.6-1.0% | 1.5-2.0% | 0.9-1.0% |
Debt/Liquid Funds | 0.1-0.3% | 0.3-0.7% | 0.2-0.4% |
A 1% difference might seem small. It isn't.
👉 Tip: Check your fund's factsheet on the AMC website. It lists both direct and regular expense ratios so you can see exactly what you're paying.
The Compounding Impact Over Time
Here's an example from ClearTax that every NRI should see:
Invest ₹25,000 monthly for 30 years at 12% expected returns.
Regular Plan (1.5% expense ratio): Final corpus = ₹6.3 crores
Direct Plan (1.0% expense ratio): Final corpus = ₹7.8 crores
Difference: ₹1.5 crores. That's 24% more wealth simply by choosing direct.
Recent Upstox analysis showed similar results. A ₹10,000 monthly SIP in Parag Parikh Flexi Cap Fund for 10 years gave ₹34.8 lakhs in direct plan versus ₹32.9 lakhs in regular. That's ₹1.94 lakhs extra just by avoiding the commission.
Why Do Regular Plans Still Exist?
Regular plans aren't scams. They serve a purpose.
Distributors provide genuine value for many investors: hand-holding during market crashes, help with KYC completion, portfolio reviews, and guidance on fund selection. For someone who'd otherwise not invest at all, this service justifies the cost.
The problem? Most NRIs don't realize they're paying for advice they may not need or use.
👉 Tip: If your distributor hasn't contacted you in over a year, you're paying for a service you're not receiving. Consider switching to direct.
Are Taxes Different for Direct vs Regular?
No. Taxation is identical for both plans.
For NRIs, capital gains tax rates apply the same way:
Equity Funds (held over 12 months): 12.5% LTCG on gains exceeding ₹1.25 lakhs
Equity Funds (under 12 months): 20% STCG
Debt Funds: Taxed at your slab rate regardless of holding period (post April 2023 rules)
TDS is deducted at redemption in both cases. The fund house withholds tax before crediting proceeds to your NRO account.
How Can NRIs Invest in Direct Plans?
Several options work for NRIs:
AMC Websites: Visit HDFC MF, ICICI Prudential, or any fund house directly. Complete KYC and invest through your NRE or NRO account.
MF Central: A unified platform by CAMS and KFintech that offers direct plans from all AMCs in one place.
Investment Platforms: Some apps offer direct plans with portfolio tracking features. Verify NRI acceptance before signing up.
Important for US/Canada NRIs: Due to FATCA compliance, many platforms and AMCs don't accept US/Canada residents. Check the AMC's NRI policy page before starting. GIFT City investments through Belong offer an alternative that avoids these restrictions.
When Should You Choose Regular Plans?
Regular plans make sense when:
You're new to investing: If terms like NAV, expense ratio, and rebalancing confuse you, professional guidance has real value.
You need behavioral coaching: A good advisor stops you from panic-selling during crashes. This alone can save more than the commission costs.
Complex situations: Multi-country tax obligations, inheritance planning, or large portfolios benefit from professional management.
Limited time: If you genuinely can't spend a few hours quarterly reviewing your portfolio, paying someone makes sense.
When Should You Choose Direct Plans?
Direct plans suit you if:
You understand basics: You can differentiate between large cap, mid cap, and small cap funds. You know what SIP vs lump sum means.
You can manage yourself: You'll actually review your portfolio quarterly and rebalance when needed.
You prefer simple strategies: Index funds tracking Nifty 50 or Nifty Next 50 don't need distributor guidance.
Cost matters: Over a 20-30 year horizon, the 0.5-1% annual savings compounds into lakhs.
👉 Tip: Many NRIs use a hybrid approach. Direct plans for straightforward index funds. Regular plans for complex categories like international funds or sector-specific strategies where expert guidance helps.
How to Switch from Regular to Direct
Switching is straightforward but has implications.
Step 1: Log into the AMC website or MF Central with your folio details.
Step 2: Select "Switch" and choose the direct plan of the same fund.
Step 3: Submit the request. Units will transfer within 2-3 business days.
Tax Implication: Switching is treated as redemption plus fresh purchase. If you have gains, you'll pay capital gains tax. If you're within exit load period, that applies too.
Better Approach: Instead of switching existing investments, start new SIPs in direct plans. Let existing regular plan investments continue if they're in profit and you want to defer tax.
How to Check If Your Fund Is Direct or Regular
Look at your account statement or the scheme name in your portfolio. Direct plans always include "Direct" in the name.
Examples:
- "HDFC Flexi Cap Fund - Direct Growth" = Direct Plan
- "HDFC Flexi Cap Fund - Growth" = Regular Plan
You can also compare the expense ratio on the AMC factsheet. If your expense ratio matches the higher "regular" figure, you're in the regular plan.
The Smart NRI Approach
Here's what we recommend to members of our community:
For simple, passive strategies like Nifty 50 index funds, go direct. The funds require no active guidance, and saving 0.5-1% annually is pure profit.
For complex allocations involving debt funds, international exposure, or sector themes, consider whether you genuinely need guidance. If yes, regular plans through a competent advisor justify the cost.
Whatever you choose, know what you're paying for.
Questions about your specific situation? Join our WhatsApp community where many NRIs discuss these decisions daily. Or download the Belong app to explore your India investment options.
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