Income Distribution cum Capital Withdrawal — the mutual fund option (formerly called Dividend) where the scheme periodically distributes a portion of accumulated profits to investors.
SEBI renamed the Dividend option to IDCW in 2021 to accurately describe what actually happens: the payout is not 'extra' income — it's a distribution of the fund's own accumulated gains, and sometimes even capital. When an IDCW is declared, the NAV of the scheme falls by exactly the distributed amount on the ex-date. Total investor wealth does not increase from an IDCW payout — it simply shifts from the fund to the investor's bank account.
If you have ₹1,000 in your wallet and move ₹200 to your pocket, you don't have more money — it's just in a different place. IDCW works exactly like that. The fund takes some money from the NAV and sends it to your bank. Your total wealth (fund value + cash received) stays the same, but the fund NAV drops. IDCW is useful if you need periodic cash flow — not for wealth creation.
The AMC's Board of Trustees decides IDCW frequency (monthly, quarterly, annual) and amount per unit.
IDCW is not guaranteed — it depends on distributable surplus and trustee discretion.
On the ex-date, NAV falls by the declared IDCW amount per unit. You receive the payout in your bank.
IDCW from equity funds: taxed at 10% (plus surcharge and cess) in the investor's hands.
IDCW from debt funds: added to investor income and taxed at their applicable slab rate.
You hold 500 units of a fund at NAV ₹30 = ₹15,000 total value. The fund declares ₹2 IDCW per unit. On ex-date: NAV drops to ₹28. You receive ₹1,000 (500 × ₹2). Your units are now worth ₹14,000. Total = ₹15,000 — same as before the payout. You also owe 10% tax on ₹1,000, leaving you with ₹900 net. The Growth option investor's ₹15,000 remained intact and kept compounding.