IDCW Option
The plan option under which a fund periodically distributes part of the NAV to unit holders as income distribution cum capital withdrawal.
Formula
Post-Payout NAV = Pre-Payout NAV - Amount Distributed per Unit
Unit
₹
In depth
SEBI renamed this from dividend option to income distribution cum capital withdrawal in 2021 precisely because investors believed it was income earned in addition to their holding, when the payout comes out of their own NAV. The unit count is unchanged and the NAV falls by exactly the amount paid, so the investor is no better off before tax and worse off after it. Since 2020 such distributions are taxed at the investor's slab rate, with tax deducted at source above a threshold, which makes the option costly for anyone in a higher bracket. A systematic withdrawal plan achieves regular cash flow with capital gains treatment instead.
Worked example
1,000 units at a NAV of ₹124.50 are worth ₹1,24,500. A ₹12 per unit payout gives ₹12,000 in cash and leaves 1,000 units at ₹112.50, worth ₹1,12,500 — the same ₹1,24,500 in total, now partly taxed.
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 “IDCW 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.