What is IDCW in Mutual Funds?
IDCW stands for Income Distribution cum Capital Withdrawal . It is the new term used by SEBI (Securities and Exchange Board of India) in place of the older term “Dividend option” in mutual funds. ✅ Meaning of IDCW: When you invest in a mutual fund under the IDCW option , the fund may distribute a part of the profit (or capital) to you from time to time. This payout is not guaranteed and depends on the fund’s performance and availability of distributable surplus. In simple words: IDCW is the amount the mutual fund pays you during the investment period. It reduces your NAV (Net Asset Value) accordingly. 🔍 Types of IDCW Options: IDCW – Payout: The dividend is paid directly to the investor. IDCW – Reinvestment: The dividend is reinvested to purchase more units of the same scheme. 📉 How IDCW Affects NAV: After the IDCW is paid, the NAV of the mutual fund decreases by the same amount. For example: If NAV = ₹100 and IDCW = ₹5, then new NAV = ₹95. 🧾 Taxation of IDCW: Since 1 ...