Cost and TaxesLast Updated: June 04, 2019
Yes, there are some taxes and charges depending on the type of Mutual Fund you are investing in (Equity Mutual Funds and Debt Mutual Funds).
The Mutual Fund Company is providing you a service - investing your money professionally - and it charges you for it.
There are broadly 3 kinds of charges that you will incur while investing in Mutual Funds:
1. Fund Management Fees or 'Expense Ratio'
Your Mutual Fund manager and his team need a salary to work for you and there are a host of other operational costs involved in setting up and running a Mutual Fund. All these costs are clubbed together as fund management fees and are charged as a percentage of the money being managed (hence also known as the Expense Ratio). It varies from fund to fund. For equity funds it is generally in range of 2-2.5% and for debt funds, the range is usually lower - about 0.1-1%.
Since we provide Direct Mutual Funds, there is no commission involved in the Expense ratio of the funds. In short you only pay to the Mutual Fund company for the services they provide.
2. Exit Load
Exit load is like a penalty for withdrawing your investments too soon. Mutual Funds usually do not have lock-ins but they do charge you for very quick withdrawal of funds. Not all funds have it but it is fairly common in equity funds. Also, the length of time considered as too-soon is generally 1 year for equity funds (there are exceptions) but varies greatly for debt funds.
None of our recommended debt funds have exit load penalty.
Capital Gains Taxes are applicable only when you sell and only on the gains made on the units being sold. Here's a table that summarizes the taxes:
You can read more about them here.