Growth Option — Mutual Fund Term Explained

The default option where all returns are reinvested — no payouts. NAV compounds over time. Tax-efficient for long-term investors.

In the Growth option, the fund does not pay any distributions. All returns remain invested, compounding the NAV. The most popular and tax-efficient option for long-term wealth creation.

Since IDCW distributions are taxed at slab rate while Growth option equity gains are taxed at 12.5% after 1 year, Growth delivers significantly higher post-tax wealth.

Related terms

• IDCW (Income Distribution cum Capital Withdrawal) — Previously called the dividend option. The fund distributes money from its NAV. Not a bonus — your NAV falls by the distribution amount.
• NAV (Net Asset Value) — The price of one unit of a mutual fund, calculated daily from portfolio value minus liabilities divided by units outstanding.
• LTCG (Long Term Capital Gains) — Tax on mutual fund gains after the qualifying period. For equity: 12.5% on gains above ₹1.25 lakh/year after 1 year. For debt: slab rate.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.