Can you switch from growth option to dividend option in a Mutual Fund?

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Mutual fund provide two types of options to investors at the time of making an application. One is the dividend option and the other is the growth option.

At times your own need would have changed and you may want to opt for dividend to meet your monthly expenditure, while at other times you may want the money to grow to meet a future need.

You can opt for changing the scheme or switching from the growth option to dividend option or vice versa in a mutual fund scheme.

However, one needs to remember that the net asset value of the schemes will most certainly be different. For example, the net asset value under the growth scheme would almost certainly be higher than the dividend scheme.

Also, one must remember that the codes are different. In any case, what you need to do is fill the form containing the switchover request to facilitate the transfer from one option to another. 

Also read What is entry and exit load in a mutual fund?

What will be the implication?

The only implication will be with regards to the tax liability. In fact. the difference between the growth and dividend option with regards to a mutual fund scheme is the tax treatment. For example,if you opt for the dividend option you must remember that the dividend income is tax free. On the other hand under the growth scheme one would attract a capital gains tax.

There are many investors who are today moving from the growth option to the dividend option to reduce their tax liability. This is sensible if you are already paying taxes.

Read more about: mutual funds
Story first published: Monday, June 30, 2014, 14:15 [IST]
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