Plans and options
What is IDCW in mutual funds?
IDCW, earlier called the dividend option, pays out part of a scheme's value from time to time. The NAV falls by the amount paid, so it is your own money coming back.
How it works
SEBI renamed dividends IDCW in 2021 to make clear that payouts can come from your capital, not only from profits. The amount and timing are not guaranteed.
IDCW is added to your income and taxed at your slab rate, and the fund house deducts 10% TDS once its payouts to you cross ₹10,000 in a year. The reinvestment variant buys more units instead of paying cash.
Example
A scheme's NAV is ₹20 and it declares IDCW of ₹1 a unit. You receive ₹1 for each unit and the NAV drops to about ₹19. Your total wealth is unchanged before tax.
Keep in mind
- IDCW is not extra income on top of returns.
- For most investors in higher tax slabs, a growth option with an SWP is more tax-efficient.
Questions people ask
Is IDCW the same as interest?
No. It is a payout of part of the scheme's value, and the NAV falls by the same amount.
How is IDCW taxed?
At your slab rate, with 10% TDS once payouts from a fund house cross ₹10,000 in a year.
Related terms
General information for education, not investment advice or a recommendation of any scheme. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not be sustained in future. Last reviewed 25 October 2026.