Starting April 1, 2021, the Securities and Exchange Board of India (SEBI) renamed dividend option plans to IDCW option plans. IDCW stands for Income Distribution cum Capital Withdrawal. This option involves redistributing part of your capital and income earned under the plan/s back to you as dividends, essentially returning a portion of your investment to you.
Here's how Income Distribution cum Capital Withdrawal (IDCW) works:
Income Distribution: When a mutual fund has a distributable surplus, it can reinvest them or distribute them to investors.
IDCW: Whenever distributable surplus is distributed, it includes both income distribution and capital distribution and based on the units held by the investors in the Fund.
