In 2026, charges associated with Systematic Investment Plans (SIPs) include an e-mandate fee, where some banks charge a one-time fee ranging from Rs 50 to Rs 236 for setting up automated payments. SIPs are indeed one of the most investor-friendly tools for wealth creation. However, knowing about SIP cancellation charges, brokerage charges, SIP redemption charges, and other hidden charges in SIP will help you avoid surprises down the road. SIP returns are subject to capital gains tax, which varies based on fund type and holding period. Additionally, an exit load, typically 1% for equity funds, applies if investments are redeemed before a specified time, usually within a year.
What are SIP charges?
SIP charges refer to the costs associated with investing in mutual funds through a Systematic Investment Plan. While there is no separate fee for starting or maintaining an SIP, mutual funds levy an expense ratio that covers fund management, administration, and distribution costs. Some platforms may also charge transaction or convenience fees, though many waive them for SIPs. Charges can vary depending on whether you choose a direct or regular plan. These costs are deducted from the fund’s assets and reflected in the NAV, meaning they indirectly affect your overall returns over time.
Are there charges for SIP investments?
There are no explicit charges for initiating or running an SIP, but the mutual fund’s expense ratio applies to all investors, whether they invest via SIP or lump sum. The expense ratio, expressed as a percentage of assets, covers fund management and operational expenses. In regular plans, distributor commissions are included, making them costlier than direct plans. While most AMCs and platforms do not levy additional SIP processing fees, certain third-party portals may have nominal transaction costs. Over the long term, even small differences in expenses can impact returns, so understanding and comparing costs is important before starting an SIP.
Types of SIP charges
Typically, initiating or stopping a Systematic Investment Plan (SIP) via the Asset Management Company’s (AMC) official website or mobile application does not involve any charges. However, certain third-party platforms or brokers may levy brokerage fees for SIP transactions.
Take a look at what these charges are:
Exit load
SIPs are a popular investment option mainly because they offer high liquidity, along with high returns. This means that you can withdraw from your SIP as and when you wish to. However, when you liquidate your SIPs, you need to pay a charge known as an exit load. This charge is a one-time fee and is expressed as a percentage of your total gains from the SIP. You only have to pay this charge if you exit the SIP prematurely. This means withdrawing from the SIP before the lapse of the holding period that the fund house has defined.
Transaction charges
This is another one-time fee that you need to pay if your investment in SIPs is over Rs. 10,000 at any given time. This charge amounts to Rs. 100 and is deducted in four consecutive instalments. You have to pay transaction charges along with your 2nd, 3rd, 4th and 5th instalments.
Expense ratio
Expense ratio in mutual funds is a measure of the total annual costs associated with managing and operating a mutual fund, expressed as a percentage of the fund's average assets under management (AUM). It includes various fees and expenses incurred in running the fund, such as management fees, administrative expenses, distribution fees (if any), and other operational costs. The expense ratio is deducted from the fund's returns before they are distributed to investors.
Recurring charges or ongoing expenses
As the name suggests, these aren’t one-time charges. You have to pay recurring costs or ongoing expenses on the daily net assets of your mutual fund. It is important to note that the regulator outlines the extent to which these charges are to be levied, and your fund house can’t charge you more than the specified amount. The expenses are deducted from the net assets of the funds, after which the NAV is posted.
Understanding these three charges will give you a better idea of the total cost of investing in SIPs and compare them with the returns. Besides, it also helps you understand how transparent and minimal the charges associated with a SIP are, unlike several other options, such as ULIPs that bear multiple, complicated charges. Most importantly, with clarity regarding the charges that accompany a SIP, you will be able to understand whether or not this is an ideal investment option for you in terms of affordability. Moreover, it will also allow help you identify an investment amount that suits your needs.
Use the Bajaj Finserv SIP calculator to begin a new SIP, this will help you see your total invested amount, final maturity value, and earnings from your investment.
Are there hidden charges on SIP investments?
- Expense ratio: What it covers and why it matters
The expense ratio is the annual fee charged by a mutual fund to manage your investments. It covers fund management costs, administrative expenses, and distribution-related charges. This cost is deducted from the fund’s assets, which means it directly affects your overall returns. A higher expense ratio can reduce the amount you earn from your investment over time.
For example, if a fund generates a return of 12% and has an expense ratio of 2%, your effective return will be around 10%. Therefore, comparing expense ratios is important when selecting a mutual fund.
2. Exit load vs other fund-level costs
Exit load is a charge applied when investors redeem mutual fund units before the specified holding period. However, it is not the only cost associated with mutual fund investments. Other fund-level expenses, such as transaction-related costs and regulatory charges, are built into the fund’s expenses and may not be clearly visible to investors. Although these costs are not charged separately, they can still affect the fund’s overall performance and reduce the returns earned by investors over time.
3. Difference between direct plans and commission-based plans
Direct Plans allow investors to invest directly with the fund house without paying distributor commissions. As a result, they generally have lower expense ratios and can offer better long-term returns. Regular Plans, on the other hand, include distributor commissions within the fund’s expenses. These SIP brokerage charges are paid to intermediaries and increase the overall cost of investing. While the difference may appear small initially, the higher charges in Regular Plans can significantly reduce investment gains over the long term, especially when investing through SIPs for many years.
How to minimise SIP charges
- Invest directly through the AMC’s website or app to avoid intermediary fees.
- Choose direct mutual fund plans to reduce expense ratios.
- Avoid premature withdrawals to prevent exit load charges.
- Compare platforms for transparency on brokerage and other charges.
Conclusion
SIPs are among the most convenient and investor-friendly ways to build long-term wealth. However, it is important to understand SIP cancellation charges, brokerage charges, SIP redemption charges, and other costs associated with SIP investments to avoid unexpected expenses.
Choose suitable mutual funds and investment platforms after reviewing their fee structure. Regularly track your fund’s performance and expense ratio with the help of a SIP calculator, and avoid redeeming your investments early unless absolutely necessary. You may also seek guidance from a share advisory company for personalised investment planning.
Investors should also be aware of SIFs, introduced by SEBI to bridge the gap between mutual funds and PMS. SIFs provide greater investment flexibility, professional fund management, and lower entry requirements, helping investors make more informed financial decisions and plan their financial goals effectively.
