IDCW (Income Distribution cum Capital Withdrawal) — Mutual Fund Term Explained

Previously called the dividend option. The fund distributes money from its NAV. Not a bonus — your NAV falls by the distribution amount.

IDCW is the SEBI-mandated name for what was previously called the dividend option. When a fund declares IDCW, it distributes money to unit holders — but this comes from the fund's NAV, reducing it.

IDCW is often misunderstood as free income. It is your own capital being returned. Also tax-inefficient: IDCW is taxed at your slab rate. The Growth option is almost always better.

Related terms

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