On 29 February, Tata India Tax Savings Fund declared a dividend of Rs.9 per unit. There was nothing out of the ordinary about that, except that the same scheme’s direct plan’s dividend option declared a dividend of just Rs.2 per unit. The plan that declared Rs.9 per unit was the regular plan. But do two different sets of investors of the same scheme get different dividends? Scores of other schemes declared dividends only under their regular plans and not their direct plans. Why?
According to guidelines that the capital market regulator, Securities and Exchange Board of India (Sebi), laid down in 2012, all mutual fund (MF) schemes, existing as well newly launched ones, must have a regular plan and a direct plan. A regular plan is meant for those who go through distributors and the distributor’s cost is embedded in the plan’s net asset value (NAV). A direct plan is meant for those who deal with the fund houses directly (there is no distribution cost here and hence its expense ratio is lesser).
