A dividend plan in the context of mutual funds refers to the option—now called the IDCW (Income Distribution cum Capital Withdrawal) plan under SEBI's revised nomenclature—where the fund periodically distributes a portion of its realised gains and income to unit holders instead of reinvesting them. Investors who prefer regular cash payouts from their investments may choose this plan. However, it is important to understand that IDCW payouts come from the fund's own NAV and are subject to applicable tax at the investor's income tax slab rate, unlike the growth plan where gains accumulate and are taxed as capital gains at the time of redemption.
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