Direct equity or mutual funds: costs, tax and ownership

Direct stock trades are taxed when each sale happens; trades inside an equity fund are not taxed in your hands until you redeem units. The tax guide works both cases.

The same fund, with a lower expense ratio in the direct plan because no distributor commission is paid. The guide shows the gap over the years.

It is charged every year on the whole amount, so it compounds. The expense ratio and fee drag calculators put it in rupees.

In a fund, the fund does and you hold units. With direct equity the shares sit in your own demat, held at NSDL or CDSL.