This happens because the payout is taken out of the scheme s overall value and transferred to investors either as cash or additional units IDCW is a mutual fund option designed for investors who prefer receiving a portion of their returns as cash flow instead of letting all gains stay https://demo.wowonder.com/1781733494945671_562750 Through IDCW Income Distribution cum Capital Withdrawal earlier known as the dividend option schemes may distribute surplus whenever available In this option the mutual fund distributes the available surplus at regular intervals and credits the amount directly to the investor s bank account as cash The reduction in NAV is equal to the amount distributed to investors Investors need to know whether the dividends are paid monthly quarterly or annually Let s understand this with an example Focuses on large cap stocks ensuring steady returns and https://demo.wowonder.com/1780039836877996_557547 IDCW distributions On April 6 7576 https://demo.wowonder.com/1773791877628237_533071 Securities and Exchange Board of India formally discontinued the use of the term dividend option in mutual funds and replaced it with IDCW This payout is not a dividend but a distribution from the fund s profits and sometimes even its capital All smallcases present in the articles https://demo.wowonder.com/1778248632622159_551464 created by SEBI licensed entities Dividend and mutual fund income will now be fully taxable You can now apply for a loan against mutual funds LAMF on smallcase While it can help meet https://demo.wowonder.com/1773797422277616_533088 needs it is important to understand that these payouts are not additional returns https://demo.wowonder.com/1781712079355203_562700 a distribution of https://demo.wowonder.com/1777069846317239_547062 scheme s own value which also reduces the Net Asset Value If you re investing for steady income IDCW may be an option but for maximum wealth accumulation the Growth Option remains a better choice Choosing between IDCW and Growth ultimately depends on financial goals Disclaimer Investment in securities market are subject to market risks read all the related documents carefully before investing Banayantree Services Limited Non Individual SEBI Registered Investment Advisers RIA No It leads to relatively lower overall returns compared to the growth option of the same fund SEBI has renamed the Dividend Plan to the Income Distribution cum Capital Withdrawal IDCW Plan If you re an investor seeking regular payouts from your mutual fund investments understanding IDCW is crucial Whenever an IDCW is declared and paid the Net Asset Value of the mutual fund adjusts downward IDCW plans can be a suitable option for those who want to avoid the hassle of selling units from their mutual fund portfolio However high taxation and NAV reduction make it less suitable for long term wealth building Earlier companies used to pay a Dividend Distribution Tax DDT of 65 on dividends