How Does a Calculator Work: Direct vs Regular SIP Cost
See how ₹1,000 SIP over 10 years shrinks with regular plan commissions. Run the numbers, compare direct vs regular, and pick the plan that fits you.
# Direct vs Regular Mutual Funds: How ₹1,000 SIP Over 10 Years Impacts Your Corpus
Priya opened her first mutual fund statement last month and did what most of us do: she looked at the returns column, felt briefly pleased, and closed the PDF. She never noticed the line item quietly shaving a slice off every rupee she invests. That slice is the commission gap between regular and direct plans, and over a decade it compounds into real money. This article compares both options with a plain ₹1,000 monthly SIP, explains **[how does a calculator work](/blog/step-up-your-sip-how-10-annual-increase-can-double-wealth)** when you plug in those numbers, and tells you which plan suits whom. If you are a first-time investor who bought whatever your bank relationship manager handed over, this one is for you.
## The two plans, and who each one is for
A **regular plan** is sold through a distributor: your bank, an agent, a fintech app's advisory arm. The distributor earns a trailing commission, typically 0.8% to 1.5% a year on equity funds, deducted from the fund's [expense ratio](/blog/4-silent-mutual-fund-mistakes-that-are-eating-your-returns) before you see returns. It suits investors who genuinely need hand-holding, goal mapping, and someone to call when markets fall 15% and panic sets in.
A **direct plan** is bought straight from the fund house or a platform like Zerodha Coin, Groww, or MF Central. No distributor, no commission. Expense ratios run 0.3% to 0.7% lower for equity funds. It suits anyone comfortable picking a fund, setting up an SIP, and ignoring the noise.
Same underlying portfolio. Same fund manager. Same stocks. The only difference is who gets paid and how much.
## What the commission actually costs you
Here is the arithmetic that makes **mutual fund commissions** concrete. Assume a 12% annual return before expenses and a ₹1,000 monthly SIP for 10 years, which is ₹1.2 lakh invested in total.
| Metric | Direct plan | Regular plan |
|---|---|---|
| Monthly SIP | ₹1,000 | ₹1,000 |
| Assumed expense ratio | 0.5% | 1.5% |
| Net annual return | ~11.5% | ~10.5% |
| Estimated corpus after 10 years | ~₹2.12 lakh | ~₹2.02 lakh |
| Gap | | ~₹10,000 to ₹12,000 |
That gap looks modest because the SIP is small and the horizon is one decade. Stretch the same SIP to 20 years and the difference widens to roughly ₹70,000 to ₹90,000. Bump the SIP to ₹10,000 and the ten-year gap alone crosses ₹1 lakh. Commissions do not just cost you the fee; they cost you every future return that fee would have earned.
## How does a calculator work, and why it matters here
A **[SIP calculator](/blog/3-500-monthly-sip-how-to-grow-3-crore-over-time)** is not magic. It runs one formula:
Future value = P × [((1 + r)^n − 1) / r] × (1 + r)
where P is your monthly instalment, r is the monthly rate (annual return divided by 12), and n is the number of months. That is it. The calculator takes three inputs (amount, tenure, expected return), compounds them monthly, and spits out a corpus estimate.
So **how does a calculator work** when comparing plans? You run it twice. Once with the direct plan's net return, once with the regular plan's net return. The difference is your commission cost, expressed in rupees you can actually feel. Try it on any free SIP calculator before you commit; the number on screen is more persuasive than any article.
One caveat: calculators assume constant returns. Real equity funds swing wildly. Treat the output as a rough planning tool, not a promise.
## The goal you are actually chasing
Most salaried investors in India are not trying to beat an index. They are trying to fund a house down payment in eight years, a child's education in fifteen, or retirement in twenty-five. For those goals, a 1% annual drag matters because it compounds against you silently.
The honest framing: if you will hold for under five years, the commission gap is small enough that a good distributor's advice may be worth it. Beyond seven years, direct plans almost always win on pure math.
## Our take
For most readers of this site, **go direct**. If you can name the fund you want and set up an SIP without hand-holding, there is no reason to pay 1% a year for the privilege. Platforms like Zerodha Coin, Groww, and MF Central make direct investing painless, and the savings are yours.
Buy regular only if you genuinely value ongoing advice and would otherwise make emotional decisions. A distributor who stops you from selling in a crash is worth more than 1%. A distributor who sold you a fund because it paid the highest commission is not.
If you are unsure which camp you fall into, start a small direct SIP of ₹1,000 and see how you handle your first market dip. Your reaction will tell you more than any questionnaire.
## FAQ
**Is a direct plan always cheaper than a regular plan?**
Yes, on expense ratio, for the same fund. The gap is typically 0.5% to 1% a year for equity funds. There is no hidden catch; you simply cut out the distributor.
**Can I switch from a regular to a direct plan without tax?**
No. Switching means redeeming the regular units and buying direct units, which triggers capital gains tax. If you are in the 30% slab and held over a year, equity LTCG above ₹1.25 lakh is taxed at 12.5%. Factor that in before switching.
**Does a SIP calculator account for taxes and exit loads?**
No. It shows pre-tax corpus. Subtract exit loads (usually nil after one year) and capital gains tax to get your real in-hand amount.
Frequently asked questions
Is a direct plan always cheaper than a regular plan?
Yes, on expense ratio, for the same fund. The gap is typically 0.5% to 1% a year for equity funds. There is no hidden catch; you simply cut out the distributor.
Can I switch from a regular to a direct plan without tax?
No. Switching means redeeming the regular units and buying direct units, which triggers capital gains tax. If you are in the 30% slab and held over a year, equity LTCG above ₹1.25 lakh is taxed at 12.5%. Factor that in before switching.
Does a SIP calculator account for taxes and exit loads?
No. It shows pre-tax corpus. Subtract exit loads (usually nil after one year) and capital gains tax to get your real in-hand amount.
YourMoneyWise
