Mutual fund distributor commission rules (2026)
Mutual fund distributors earn trail commission only, paid in money by the AMC from the Regular Plan's expenses. Upfront commission is banned. Since 1 April 2026 the expense limit is the Base Expense Ratio (BER), and commission is paid GST-exclusive, so only GST-registered MFDs who upload an invoice receive the GST component.
How commission is structured
- Full trail model only. No upfront commission and no upfronting of trail, directly or indirectly, in cash or kind, through sponsorships or any other route.
- Trail is paid only in money. No non-trail incentives.
- No commission on your own investments where you are the first holder. Commission is paid if you are the second or third joint holder. Taking commission on your own investment is a SEBI violation.
- No commission on a sponsor's investment in its own mutual fund.
- Regular Plans only. MFDs cannot deal in Direct Plans (SEBI letter of 6 September 2021).
- AMFI has removed the minimum brokerage eligibility criteria (minimum investors or AUM to get paid).
What changed recently
| Change | Detail |
|---|---|
| Transaction charges abolished | The ₹100 (existing investor) and ₹150 (new investor) charge on investments of ₹10,000 and above was abolished by SEBI circular of 8 August 2025. |
| B-30 additional TER removed | The old B-30 incentive of up to 30 bps under Reg 52(6A)(b) was deleted on 31 October 2025. It is replaced by the new investor incentive. |
| BER replaces TER caps | From 1 April 2026 under SEBI MF Regulations 2026 (see below). |
| GST-exclusive payouts | From 1 April 2026; first payouts under the new structure on 1 May 2026. |
BER: the new expense framework
- TER now equals BER (Base Expense Ratio, covering fund management, distribution, RTA and trade execution) plus brokerage plus statutory levies (GST, STT, stamp duty, SEBI fees).
- BER caps are lower than the old TER caps, by up to about 15 bps. Example: index funds and ETFs go from a 1.00% TER cap to a 0.90% BER cap.
- Brokerage is capped at 6 bps for cash and 2 bps for derivatives.
- Distribution commission still comes out of Regular Plan expenses. Direct Plans still carry no commission.
GST on MFD commission
- From 1 April 2026, payouts are GST-exclusive. An unregistered MFD receives the base commission only; for example ₹100 becomes about ₹84.75.
- A GST-registered MFD receives the GST component after uploading a valid invoice. Upload by the 15th of the month for payment by month end; a late invoice rolls to the next cycle.
- AMFI circular 123/2025-26 of 12 March 2026 sets out the calculation and payout.
What you must disclose
- All commissions (trail or any other mode) you would receive on the competing schemes being considered.
- The list of mutual funds you are empanelled with, that your information is limited to those products, and that the investor can consider other products.
- If you are an associate or sponsor of an AMC: the association and the total commission.
- Separately, AMCs show in every investor's half-yearly CAS the actual commission paid to distributors in rupees for each scheme, the scheme's average expense ratio for the plan held, and total purchase value. "Commission" here includes gifts, trips and sponsorships, and is shown exclusive of taxes.
Frequently asked questions
Do mutual fund distributors get upfront commission?
No. Only trail commission is allowed, paid in money. Upfront commission and upfronting of trail are banned in any form.
How is GST handled on MFD commission from 2026?
From 1 April 2026 commission is paid GST-exclusive. Unregistered MFDs get the base amount; GST-registered MFDs get GST after uploading a valid invoice by the 15th.
What is BER in mutual funds?
Base Expense Ratio, introduced by SEBI MF Regulations 2026. It covers fund management, distribution, RTA and trade execution. TER is BER plus brokerage plus statutory levies.
Can I earn commission on my own mutual fund investment?
Not where you are the first holder; that is a SEBI violation. Commission is paid if you are the second or third joint holder.
Are transaction charges still paid to MFDs?
No. SEBI abolished the ₹100 and ₹150 transaction charges by circular dated 8 August 2025.
Sources
- SEBI (Mutual Funds) Regulations, 2026
- AMFI Master Circular for MFDs (AMFI/MFD-CIR/32/2025-26, 14 Jan 2026)
- AMFI Distributor Corner
Also drawn from AMFI and SEBI circulars cited in the text. Rules change often; check the latest circulars before acting.
This guide summarises AMFI and SEBI rules as of 4 October 2026 for information only. It is not legal or regulatory guidance. Rabbit Invest is a software platform for mutual fund distributors and is not an Investment Adviser under SEBI IA Regulations 2013.