How IDCW (dividend) payouts are taxed
IDCW is added to total income and taxed at the slab rate, with TDS once it crosses ₹10,000 in a year.
General educational information on Indian mutual-fund taxation — not tax or investment advice. Tax rules and figures change and depend on your individual circumstances; consult a qualified professional before acting on any of this.
Not tax or investment advice.
IDCW is taxed as income
The IDCW option (Income Distribution cum Capital Withdrawal, formerly labelled the dividend option) distributes part of a fund's value. Since FY 2020-21, an IDCW payout is added to the investor's total income and taxed at the applicable slab rate — there is no separate concessional rate.
TDS under Section 194K
The fund house deducts TDS at 10% on IDCW paid to a resident investor when the total IDCW from that fund exceeds ₹10,000 in a financial year (the threshold was raised from ₹5,000 with effect from 1 April 2025). The TDS is adjusted against the final tax liability when the return is filed.
Growth vs IDCW
Under the Growth option no payout is made, so there is no annual IDCW to tax; gains are then taxed only on redemption under the capital-gains rules. The difference between Growth and IDCW is about when income is taxed — a factual distinction, not a recommendation.
Figures are general and apply to FY 2025-26.