What is TER in mutual funds?

TER (Total Expense Ratio) is the annual cost of running a fund as a % of average daily AUM. It covers management fees, admin costs, and distributor commissions. It is accrued daily in the NAV, not charged separately.

What is the maximum TER for equity mutual funds in India?

For equity funds with AUM up to ₹500 crore, SEBI allows a maximum TER of 2.25%. The limit reduces in slabs as AUM increases, going down to 1.05% for AUM above ₹50,000 crore.

What is the NAV cut-off time for equity mutual funds?

3 PM on business days. Applications received before 3 PM (with funds) get the same-day NAV. After 3 PM, the next business day's NAV applies. Liquid/overnight funds have a 1:30 PM cut-off.

When does NAV applicability depend on fund realisation rather than application time?

For investments above ₹2 lakh, NAV applicability is the day funds are realised by the AMC, not the application submission date. This applies to cheque payments above this threshold.

NISM V-A Chapter 7: NAV & TER Formulas for 8 Marks (2026)

NISM V-A Chapter 7 covers NAV formula, TER limits (SEBI slabs), and cut-off rules. Get the 8 marks for calculation questions guaranteed on every paper.

How Is NAV Calculated? The Formula You Must Know

Chapter 7 carries 8 marks and is the most numerically tested chapter in NISM V-A. NAV calculation, TER limits, and cut-off times are tested with exact numbers. Get the formulas right and these 8 marks are reliable.

NAV (Net Asset Value)The per-unit market value of a mutual fund scheme. Formula: NAV = (Market Value of Investments + Receivables + Accrued Income – Liabilities – Accrued Expenses) ÷ Number of Units Outstanding. Calculated and published daily for all open-ended schemes.

NAV Calculation — Worked Example

A scheme has: investments worth ₹100 crore, receivables of ₹2 crore, accrued income ₹1 crore, total liabilities ₹3 crore, and 90 lakh units outstanding.

NAV = (100 + 2 + 1 – 3) ÷ 90 = 100 ÷ 90 = ₹11.11 per unit

DailyNAV publication frequency for open-ended funds — SEBI requires NAV to be published by 11 PM on each business day

What Is TER and What Are the SEBI Limits?

TER (Total Expense Ratio) is the annual cost of running a mutual fund expressed as a percentage of average daily AUM. It is charged daily and accrued in the NAV — not deducted separately from your account. TER includes: management fee, administrative costs, marketing expenses, and distributor trail commission.

SEBI sets maximum TER limits based on AUM slabs. For equity schemes: 2.25% for AUM up to ₹500 crore, declining in slabs to 1.05% for AUM above ₹50,000 crore. Debt schemes get 0.25% lower limits at each slab. Direct plans have no explicit TER cap but must be lower than the regular plan TER by the trail commission amount.

Compare the TER of any fund's direct vs regular plan at BullWiser's fund analyser — the difference compounds dramatically over 15–20 years.

What Are Cut-Off Times for NAV Applicability?

The NAV applicable to a transaction depends on when the funds are received by the AMC — not when you submit the form. Cut-off times: for equity/hybrid/debt (non-liquid): 3 PM — transactions received before 3 PM get same-day NAV; after 3 PM get next business day NAV. For liquid/overnight funds: 1:30 PM cut-off for same-day NAV.

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For investments above ₹2 lakh in any scheme, the NAV applicable is the day when funds are realised by the AMC — regardless of when the application is submitted. Cheque investments above ₹2 lakh receive realisation-date NAV, not application-date NAV.

Chapter 7 Practice Questions

Q1. A scheme has net assets of ₹500 crore and 50 crore units. What is the NAV?

Answer: ₹10. NAV = ₹500 crore ÷ 50 crore units = ₹10 per unit.

Q2. An investor submits a purchase application with a cheque for ₹3 lakh at 2 PM. Which day's NAV applies?

Answer: The NAV of the day the cheque is realised (typically T+1 or T+2 banking days). For investments above ₹2 lakh, NAV applicability is based on fund realisation, not application time.

Q3. What is the maximum TER for an equity scheme with AUM of ₹400 crore?

Answer: 2.25%. For equity schemes with AUM up to ₹500 crore, SEBI allows a maximum TER of 2.25%.

Practice all NAV and TER calculation questions — BullWiser NISM Mock Test →

BullWiser is not a SEBI-registered investment adviser. Nothing on this page constitutes investment advice. Full Disclaimer ↗

Continue to Chapter 8: Taxation or back to the full NISM V-A guide.