How to claim mutual fund dividends on Coin

Mutual fund investors on Zerodha Coin who choose the IDCW plan (Income Distribution cum Capital Withdrawal – formerly called the Dividend plan) receive periodic cash payouts from the fund’s distributable surplus. These payouts are automatically credited to the investor’s registered bank account; no manual claim process is required.

This guide explains what IDCW means, how it works for demat-held Coin units, and how to ensure you receive and report payouts correctly.

What is IDCW: SEBI’s renaming from “dividend”

Effective 1 April 2021, SEBI mandated that all mutual fund “dividend” plans be renamed to IDCW (Income Distribution cum Capital Withdrawal) plans, and the term “dividend” in the scheme name be replaced by “IDCW”. This was done through SEBI Circular SEBI/HO/IMD/DF3/CIR/P/2020/197 (October 2020) to clarify that:

• IDCW is not equivalent to corporate dividends (which represent profits distributed by a company).
• IDCW payouts reduce the scheme’s NAV by the payout amount. After an IDCW payout, the NAV falls by the per-unit IDCW amount. The investor’s total wealth (cash received + reduced NAV) is the same as it was before the payout, minus any taxes.
• IDCW may include a return of the investor’s own capital (not just income/gains generated by the fund).

IDCW plan vs. Growth plan

For most long-term investors, the Growth plan is more tax-efficient because the tax event (capital gains) is deferred until redemption. IDCW plans are sometimes chosen by investors in lower tax brackets who need a regular cash payout.

Coin displays both plan variants on each fund’s detail page. All plans on Coin are direct plans.

How IDCW works for demat-held units

When a mutual fund declares an IDCW payout:

1. The AMC’s board of trustees declares the per-unit IDCW amount and the record date.
2. All investors holding the scheme’s IDCW plan units as of the record date are entitled to the payout.
3. For demat-held units (as in Coin), the CDSL beneficiary owner records as of the record date determine the entitlement. Coin automatically includes you if you hold IDCW plan units in your demat account.
4. The AMC credits the IDCW amount directly to the investor’s registered bank account via NEFT/RTGS/ECS, typically within 3 to 5 business days of the record date.
5. The scheme’s NAV is reduced by the per-unit IDCW amount on the ex-date (the business day after the record date).

Step-by-step procedure

Step 1: Purchase an IDCW plan on Coin

When purchasing a mutual fund on Coin, the fund detail page offers multiple plan variants. A scheme may offer:

• Direct Growth: NAV accumulates without payouts. Most popular option.
• Direct IDCW: Payouts are declared and credited to bank. Less common.
• Direct IDCW Reinvestment: Payouts are reinvested into additional units at the prevailing NAV instead of being credited to bank.

To receive cash IDCW payouts, select Direct IDCW (not IDCW Reinvestment). Click Invest or SIP on this variant and complete the purchase as described in How to buy your first mutual fund on Coin.

Step 2: Verify your bank account registration

IDCW payouts are credited to the primary bank account linked to your Zerodha account. To verify or update:

1. Log in to Zerodha Console (console.zerodha.com).
2. Go to Profile > Bank Accounts.
3. Confirm the primary bank account (the one marked as default for payouts).

If you need to change the registered bank account, follow Zerodha’s bank account update process (identity verification required). Note that IDCW payouts are sent by the AMC to your bank account registered in the folio (which is the Zerodha-registered account for Coin demat purchases); any bank account change must be updated both at Zerodha and reflected in the AMC’s records.

Step 3: Track IDCW declarations

You do not initiate a claim; payouts are automatic. However, you can track IDCW declaration history:

• AMC website: Most AMCs publish IDCW declaration histories on their websites, including the per-unit amount, record date, and ex-date for each declared IDCW.
• AMFI website (amfiindia.com): AMFI publishes NAV data that includes IDCW adjustments.
• Zerodha Console > Reports: IDCW transactions appear in the portfolio transaction history.

Step 4: Receive IDCW payout

On the ex-date (the business day after the record date), the scheme’s NAV falls by the per-unit IDCW amount. Within 3 to 5 business days after the record date, the IDCW amount is credited to your registered bank account.

Check your bank account statement for the credit. The payment description typically includes the AMC name and “Mutual Fund Dividend” or “IDCW”.

If the payout is not received within 5 business days, contact Zerodha support (support.zerodha.com) or the AMC’s investor service helpline.

Step 5: Review TDS deduction

Under Section 194K of the Income Tax Act, 1961 (inserted by Finance Act 2020), AMCs are required to deduct TDS (Tax Deducted at Source) at 10% on IDCW payouts if the total IDCW credited to a PAN during the financial year exceeds Rs 5,000 from a single AMC.

If TDS has been deducted:

• The amount received in your bank is net of TDS.
• The AMC issues Form 16A (TDS certificate) for each financial year in which TDS was deducted.
• Obtain Form 16A from the AMC directly, or from the TRACES portal (incometax.gov.in > TRACES) using your PAN and login credentials.

Step 6: Report IDCW in ITR

IDCW income is taxed as income from other sources at your applicable income tax slab rate (not as capital gains). This applies regardless of the holding period or fund type.

When filing your income tax return (ITR-2):

• Include the gross IDCW amount (before TDS) in Schedule OS (Income from Other Sources).
• Claim the TDS already deducted as advance tax credit in Schedule TDS2.

Zerodha Console’s Tax P&L report includes IDCW transactions. The CAMS and KFintech CAS also detail IDCW payouts for the financial year.

IDCW reinvestment option

If you selected the IDCW Reinvestment plan, instead of receiving cash, the IDCW amount is reinvested into additional units of the same scheme at the prevailing NAV on the reinvestment date. This avoids the immediate cash outflow but does not avoid the tax liability: even reinvested IDCW is taxable as income in the year of declaration, per Section 194K.

The additional units allotted through reinvestment have their own purchase date and NAV for capital gains purposes on future redemption.

What can go wrong

Wrong plan selected (Growth vs. IDCW): If you accidentally purchased the Growth plan instead of the IDCW plan, you will not receive periodic payouts. A switch from Growth to IDCW within the same AMC is possible but involves a taxable event (redemption of Growth units and fresh purchase of IDCW units).

Bank account not updated: If the AMC has an old bank account in its records (due to a previous bank account change not fully propagated), the IDCW may be sent to the old account. For demat-held units through Coin, the bank account is your Zerodha-registered account; update at Zerodha if needed.

TDS certificate not received: If you did not receive Form 16A, check the TRACES portal. The AMC must upload TDS deductions to TRACES within the due dates.

No IDCW declared: IDCW plans do not guarantee payouts. If the scheme’s NAV has not grown sufficiently above the face value, the trustees may choose not to declare an IDCW. This is normal.

Related guides

• How to buy your first mutual fund on Coin
• How to download a Coin mutual fund statement
• Capital gains tax in India
• ITR-2
• Zerodha Coin overview
• Mutual funds on Zerodha (Coin)
• SEBI

References

1. SEBI Circular SEBI/HO/IMD/DF3/CIR/P/2020/197 dated 5 October 2020 – Renaming of Dividend Option to IDCW.
2. SEBI (Mutual Funds) Regulations, 1996, Regulation 32 (Distribution of income).
3. Income Tax Act, 1961, Section 194K – TDS on IDCW from mutual funds.
4. Finance Act 2020 – Introduction of Section 194K.
5. AMFI Guidelines on IDCW declaration and payment.
6. TRACES Portal – TDS certificate download (incometax.gov.in/TRACES).
7. Zerodha Coin support documentation (support.zerodha.com).