Growth Option
The plan option in which a fund retains all gains, so returns show up as a rising NAV rather than as payouts.
How it is identified
Test: no distributions are made; the entire return is reflected in the NAV
Unit
qualitative
In depth
Under the growth option, gains compound inside the fund and tax arises only on redemption, which defers the liability and lets the untaxed amount continue working. This makes it more tax-efficient than the IDCW option for almost every investor, since IDCW payouts are taxed at the slab rate in the year received. It is also simpler, because there is no reinvestment decision to make and no risk of the payout sitting idle in a bank account. The one case for IDCW is an investor who genuinely needs periodic cash and prefers not to redeem units, though a systematic withdrawal plan usually serves that need better.
Worked example
A fund gains 15%. Under growth the NAV moves from ₹124.50 to ₹143.18 with no tax event. Under IDCW a ₹12 payout leaves the NAV at ₹131.18 and creates a taxable receipt at the investor's slab rate.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Growth Option” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.