Transaction charges are one-time fees that distributors can charge investors — ₹100–₹150 on investments above a threshold — SEBI mandates that these be deducted before units are allotted.
SEBI allows distributors to levy a one-time transaction charge on investors above a minimum investment size. For new investors: ₹150 per investment above ₹10,000. For existing investors: ₹100 per investment above ₹10,000. This charge is not levied on SIP instalments below ₹10,000 or on Direct Plan investments. The charge is deducted from the investment amount before units are allotted. Distributors earn this to partly recover onboarding costs.
If you invest ₹50,000 through a distributor and you're a new investor, ₹150 is deducted — so ₹49,850 buys units. It's a one-time charge, not recurring. Direct Plan investors don't pay this. It's relatively small compared to the long-term TER difference between Direct and Regular Plans.