Investment & Financial Planning

Growth vs IDCW Mutual Funds- Which Is Better for NRIs?

By Manish Prajapat |Last Updated: February 2, 2026

Growth vs IDCW Mutual Funds- Which Is Better for NRIs?

Between Growth vs IDCW mutual funds, NRIs often remain confused. Opting between Growth and IDCW options in mutual funds significantly impacts your returns from long-term investments. It is because in the Growth options, your profit is reinvested into your investment to create capital. In contrast, in the IDCW options, you get regular payouts that might involve your invested money.

In this blog, learn about the key differences between growth and IDCW mutual fund options for NRIs. Additionally, know how these investments work, their tax implications, and more, and maximize your tax returns by choosing the right investment.

Manish Prajapat(Tax Expert)

Mr Manish is a financial professional with over 10 years of experience in strategic financial planning, performance analysis, and compliance across different sectors, including Agriculture, Pharma, Manufacturing, & Oil and Gas. Mr Prajapati has a knack for managing financial accounts, driving business growth by optimizing cost efficiency and regulatory compliance. Additionally, he has expertise in developing financial models, preparing detailed cash flow statements, and closing the balance sheets.

Frequently Asked Questions

NRIs can get the DTAA benefit by obtaining a tax residency certificate (TRC) from their resident country and submitting it with a self-declaration form to the mutual fund house. DTAA allows for tax credits in the resident country for paid taxes in India, reducing the tax burden. Additionally, the applicable tax rate will be the lower of either the standard tax rate of India or the DTAA rate.

Based on the NRI bank account types, repatriation rules vary. Investments through an NRE account provide complete repatriation for both capital gains and principal amount without any restrictions. With NRO accounts, NRIs face strict regulations, with repatriation limited to $1 million per financial year and additional document submission.

On Growth plans, taxes are imposed upon redemption, with different tax rates for long-term and short-term capital gains. In contrast, IDCW payouts, through TDS, up to 20% face immediate taxation.

In the Growth option, profits are reinvested back into the fund through compounding, providing long-term returns. In contrast to this, IDCW offers regular payments but over long-run reduces returns. Considering this, for NRIs, Growth is generally more tax-efficient as upon redemption, taxes are imposed on gains.

Growth vs IDCW Mutual Funds- Which Is Better for NRIs?

Frequently Asked Questions

How Can NRIs Benefit From Double Taxation Avoidance Agreements?

Can NRIs Freely Repatriate Their Mutual Fund Investments?

How Does the Tax Treatment Differ for Growth and IDCW Options?

What Are the Main Differences Between Growth and IDCW Options for NRI Investors?

Growth vs IDCW Mutual Funds- Which Is Better for NRIs?

Frequently Asked Questions

How Can NRIs Benefit From Double Taxation Avoidance Agreements?

Can NRIs Freely Repatriate Their Mutual Fund Investments?

How Does the Tax Treatment Differ for Growth and IDCW Options?

What Are the Main Differences Between Growth and IDCW Options for NRI Investors?