diff --git a/src/khoj/routers/helpers.py b/src/khoj/routers/helpers.py
index 1c3394fa..f8807047 100644
--- a/src/khoj/routers/helpers.py
+++ b/src/khoj/routers/helpers.py
@@ -3002,7 +3002,7 @@ async def grep_files(
     lines_after = lines_after or 0
 
     try:
-        regex = re.compile(regex_pattern, re.IGNORECASE)
+        regex = re.compile(regex_pattern, re.IGNORECASE | re.MULTILINE)
     except re.error as e:
         yield {
             "query": _generate_query(0, 0, path_prefix, regex_pattern, lines_before, lines_after),
@@ -3012,7 +3012,14 @@ async def grep_files(
         return
 
     try:
-        file_matches = await FileObjectAdapters.aget_file_objects_by_regex(user, regex_pattern, path_prefix)
+        # Make db pushdown filters more permissive by removing line anchors
+        # The precise line-anchored matching will be done in Python stage
+        db_pattern = regex_pattern
+        db_pattern = re.sub(r"\(\?\w*\)", "", db_pattern)  # Remove inline flags like (?i), (?m), (?im)
+        db_pattern = re.sub(r"^\^", "", db_pattern)  # Remove ^ at regex pattern start
+        db_pattern = re.sub(r"\$$", "", db_pattern)  # Remove $ at regex pattern end
+
+        file_matches = await FileObjectAdapters.aget_file_objects_by_regex(user, db_pattern, path_prefix)
 
         line_matches = []
         for file_object in file_matches:
diff --git a/tests/test_grep_files.py b/tests/test_grep_files.py
new file mode 100644
index 00000000..22828e19
--- /dev/null
+++ b/tests/test_grep_files.py
@@ -0,0 +1,275 @@
+# System Packages
+import pytest
+import logging
+
+from khoj.database.adapters import FileObjectAdapters
+from khoj.database.models import KhojUser
+from khoj.routers.helpers import grep_files
+
+logger = logging.getLogger(__name__)
+
+
+@pytest.fixture
+@pytest.mark.django_db
+@pytest.mark.asyncio
+async def default_user():
+    user, _ = await KhojUser.objects.aget_or_create(
+        username="test_user",
+        password="test_password",
+        email="test@example.com",
+    )
+    return user
+
+
+@pytest.mark.django_db
+@pytest.mark.asyncio
+async def test_grep_files_simple_match(default_user: KhojUser):
+    user = await default_user
+    await FileObjectAdapters.adelete_all_file_objects(user=user)
+    # Arrange
+    await FileObjectAdapters.acreate_file_object(
+        user=user,
+        file_name="test.txt",
+        raw_text="hello world\nthis is a test\nhello again",
+    )
+
+    # Act
+    results = [
+        result
+        async for result in grep_files(
+            regex_pattern="hello",
+            user=user,
+        )
+    ]
+
+    # Assert
+    assert len(results) == 1
+    result = results[0]
+    assert "Found 2 matches for 'hello' in 1 documents" in result["query"]
+    assert "test.txt:1:> hello world" in result["compiled"]
+    assert "test.txt:3:> hello again" in result["compiled"]
+
+
+@pytest.mark.django_db
+@pytest.mark.asyncio
+async def test_grep_files_no_match(default_user: KhojUser):
+    user = await default_user
+    await FileObjectAdapters.adelete_all_file_objects(user=user)
+    # Arrange
+    await FileObjectAdapters.acreate_file_object(
+        user=user,
+        file_name="test.txt",
+        raw_text="this is a test",
+    )
+
+    # Act
+    results = [
+        result
+        async for result in grep_files(
+            regex_pattern="nonexistent",
+            user=user,
+        )
+    ]
+
+    # Assert
+    assert len(results) == 1
+    result = results[0]
+    assert "Found 0 matches for 'nonexistent' in 0 documents" in result["query"]
+    assert "No matches found." in result["compiled"]
+
+
+@pytest.mark.django_db
+@pytest.mark.asyncio
+async def test_grep_files_with_path_prefix(default_user: KhojUser):
+    user = await default_user
+    await FileObjectAdapters.adelete_all_file_objects(user=user)
+    # Arrange
+    await FileObjectAdapters.acreate_file_object(
+        user=user,
+        file_name="dir1/test1.txt",
+        raw_text="hello from dir1",
+    )
+    await FileObjectAdapters.acreate_file_object(
+        user=user,
+        file_name="dir2/test2.txt",
+        raw_text="hello from dir2",
+    )
+
+    # Act
+    results = [
+        result
+        async for result in grep_files(
+            regex_pattern="hello",
+            path_prefix="dir1/",
+            user=user,
+        )
+    ]
+
+    # Assert
+    assert len(results) == 1
+    result = results[0]
+    assert "Found 1 matches for 'hello' in 1 documents" in result["query"]
+    assert "in dir1/" in result["query"]
+    assert "dir1/test1.txt:1:> hello from dir1" in result["compiled"]
+    assert "dir2/test2.txt" not in result["compiled"]
+
+
+@pytest.mark.django_db
+@pytest.mark.asyncio
+async def test_grep_files_with_context(default_user: KhojUser):
+    user = await default_user
+    await FileObjectAdapters.adelete_all_file_objects(user=user)
+    # Arrange
+    await FileObjectAdapters.acreate_file_object(
+        user=user,
+        file_name="test.txt",
+        raw_text="line 1\nline 2\nline 3 (match)\nline 4\nline 5",
+    )
+
+    # Act
+    results = [
+        result
+        async for result in grep_files(
+            regex_pattern="match",
+            lines_before=1,
+            lines_after=1,
+            user=user,
+        )
+    ]
+
+    # Assert
+    assert len(results) == 1
+    result = results[0]
+    assert "Found 1 matches for 'match' in 1 documents" in result["query"]
+    assert "Showing 1 lines before and 1 lines after" in result["query"]
+    assert "test.txt:2:  line 2" in result["compiled"]
+    assert "test.txt:3:> line 3 (match)" in result["compiled"]
+    assert "test.txt:4:  line 4" in result["compiled"]
+    assert "line 1" not in result["compiled"]
+    assert "line 5" not in result["compiled"]
+
+
+@pytest.mark.django_db
+@pytest.mark.asyncio
+async def test_grep_files_invalid_regex(default_user: KhojUser):
+    user = await default_user
+    await FileObjectAdapters.adelete_all_file_objects(user=user)
+    # Act
+    results = [
+        result
+        async for result in grep_files(
+            regex_pattern="[",
+            user=user,
+        )
+    ]
+
+    # Assert
+    assert len(results) == 1
+    result = results[0]
+    assert "Invalid regex pattern" in result["compiled"]
+
+
+@pytest.mark.django_db
+@pytest.mark.asyncio
+async def test_grep_files_multiple_files(default_user: KhojUser):
+    user = await default_user
+    await FileObjectAdapters.adelete_all_file_objects(user=user)
+    # Arrange
+    await FileObjectAdapters.acreate_file_object(
+        user=user,
+        file_name="file1.txt",
+        raw_text="hello from file1",
+    )
+    await FileObjectAdapters.acreate_file_object(
+        user=user,
+        file_name="file2.txt",
+        raw_text="hello from file2",
+    )
+
+    # Act
+    results = [
+        result
+        async for result in grep_files(
+            regex_pattern="hello",
+            user=user,
+        )
+    ]
+
+    # Assert
+    assert len(results) == 1
+    result = results[0]
+    assert "Found 2 matches for 'hello' in 2 documents" in result["query"]
+    assert "file1.txt:1:> hello from file1" in result["compiled"]
+    assert "file2.txt:1:> hello from file2" in result["compiled"]
+
+
+@pytest.mark.parametrize(
+    "regex_pattern,expected_matches,test_description",
+    [
+        # Test with (?im) inline flags and ^ anchor
+        (r"(?im)^\d{4}-\d{2}-\d{2}.*(sailing|sail|Center for Boats|Captain Sailor)", 1, "inline flags with anchor"),
+        # Test with (?i) flag and ^ anchor
+        (r"(?i)^\d{4}-\d{2}-\d{2}.*(sailing|sail|Center for Boats|Captain Sailor)", 1, "case insensitive with anchor"),
+        # Test without any anchors
+        (
+            r"(?i)\d{4}-\d{2}-\d{2}.*(sailing|sail|Center for Boats|Captain Sailor)",
+            1,
+            "case insensitive without anchor",
+        ),
+        # Test with just the ^ anchor (no inline flags)
+        (r"^\d{4}-\d{2}-\d{2}.*(sailing|sail|Center for Boats|Captain Sailor)", 1, "anchor only"),
+        # Test without anchors or flags (should still work due to re.IGNORECASE in function)
+        (r"\d{4}-\d{2}-\d{2}.*(sailing|sail|center for boats|captain sailor)", 1, "no flags or anchors"),
+    ],
+)
+@pytest.mark.django_db
+@pytest.mark.asyncio
+async def test_grep_files_financial_entries_regex_patterns(
+    default_user: KhojUser, regex_pattern: str, expected_matches: int, test_description: str
+):
+    user = await default_user
+    await FileObjectAdapters.adelete_all_file_objects(user=user)
+
+    # Arrange - Create file with financial ledger content that has prefix text
+    ledger_content = """This is a financial ledger file
+
+1984-06-23 * "Al Zaheer, Mediteranean" "Chicken Gyro Plate, Falafel Sandwhich for Bob" #bob
+  Expenses:Food:Dining                                             11.55 USD
+  Liabilities:People:Bob                                          11.55 USD
+  Liabilities:CreditCard:Chase                            -23.10 USD
+
+1984-06-24 * "Center for Boats" "Sailing" #bob
+  Expenses:Sports                                                     30 USD
+  Liabilities:People:Bob                                           30.0 USD
+  Liabilities:CreditCard:Chase                             -60 USD
+
+1984-06-24 * "Safeway" "Groceries" #bob
+  Expenses:Food:Groceries                                          11.20 USD
+  Liabilities:People:Bob                                          11.20 USD
+  Liabilities:CreditCard:Chase                          -22.40 USD"""
+
+    await FileObjectAdapters.acreate_file_object(
+        user=user,
+        file_name="ledger.txt",
+        raw_text=ledger_content,
+    )
+
+    # Act - Test the regex pattern
+    results = [
+        result
+        async for result in grep_files(
+            regex_pattern=regex_pattern,
+            user=user,
+        )
+    ]
+
+    # Assert
+    assert len(results) == 1
+    result = results[0]
+    logger.info(f"Testing {test_description}: {regex_pattern}")
+    logger.info(f"Query: {result['query']}")
+    logger.info(f"Compiled: {result['compiled']}")
+
+    # All patterns should find the sailing entry
+    assert f"Found {expected_matches} matches" in result["query"]
+    assert 'ledger.txt:8:> 1984-06-24 * "Center for Boats" "Sailing" #bob' in result["compiled"]