Transfer of IDCW plan
Also written Transfer of IDCW plan (DTP) · DTP · Transfer of Income Distribution cum capital withdrawal plan · Dividend Transfer Plan
A facility that automatically invests the IDCW (dividend) declared in one scheme into another scheme of the same mutual fund, on the next business day after the record date.
In plain language
An investor in the IDCW option of a scheme normally has two choices when a distribution is declared: take the cash (pay-out) or buy more units of the same scheme (re-investment). The Transfer of IDCW plan adds a third: send the money into a different scheme of the same mutual fund.
The workbook calls it the Transfer of Income Distribution cum capital withdrawal plan, abbreviated DTP from its older name, Dividend Transfer Plan.
Its uses are practical. A low-risk investor in a debt fund can move the distributions into an equity fund, getting some benefit of diversification without putting the principal at risk. Going the other way, distributions from an equity fund can be moved into a debt fund to rebalance the portfolio and manage risk.
How it works
The rules (Chapter 9, section 9.11.5):
| Rule | Detail |
|---|---|
| Eligibility | Investor must hold units in the IDCW option of the source scheme |
| Coverage | All units held under the chosen scheme, plan and option are covered |
| Existing instructions | Any pay-out or re-investment instruction is overridden |
| Source and target | Investor must specify scheme, plan and option for both |
| Schemes allowed | The mutual fund decides which source and target schemes, plans and options are available |
| Folio | Target units are held in the same folio as the source |
| Minimum application | The target scheme's minimum does not apply |
| Minimum IDCW | The mutual fund may specify a minimum amount that can be transferred |
| Timing | Invested in the target scheme on the next business day after the record date |
| Registration | May need to be registered a set number of days before the record date |
| Termination | Automatic when the source holding becomes nil, or on written request |
KYC. New DTP registrations are among the transactions for which investors must be KYC compliant, alongside SIP and STP registrations.
How it differs from an STP. A systematic transfer plan moves a pre-defined amount from the source scheme on fixed dates, and each transfer is a redemption. A DTP moves only the IDCW declared, whenever and whatever the trustees declare — and the workbook reminds investors that there is no assurance about the rate or regularity of IDCW.
A worked example
Illustrative. The investor, schemes, IDCW rate and NAV are hypothetical; the mechanics are the workbook's.
Meena holds 20,000 units in the IDCW option of a short duration debt fund. She is cautious and wants a little equity exposure without touching her capital, so she registers a DTP into the growth option of a flexi cap fund of the same fund house. Her earlier pay-out instruction is overridden.
The trustees declare an IDCW of Rs 0.50 per unit with a record date of Monday, 15 September.
IDCW = 20,000 × 0.50 = Rs 10,000
On Tuesday, 16 September — the next business day — the Rs 10,000 is invested in the flexi cap fund at that day's NAV of, say, Rs 40.00:
Units allotted = 10,000 ÷ 40.00 = 250 units
The 250 units sit in the same folio. The flexi cap fund's minimum application amount is irrelevant. The debt fund's NAV falls after the record date to reflect the payout, so Meena's total wealth is unchanged at the moment of transfer; what changes is its mix.
If she later redeems all 20,000 debt fund units, the DTP ends automatically.
Why NISM asks about it
Chapter 9 (Investor Services), section 9.11.5, sets out the facility in full after SIP, SWP, STP and switch; section 9.10 lists DTP registrations among transactions requiring KYC. Chapter 7 explains the record date and the NAV fall on an IDCW payout. Expect questions on who can register (IDCW option holders only), when the amount is invested, and what happens to minimum investment limits and existing pay-out instructions.
Common exam traps
- Only IDCW option holders can register. A growth option investor has no distribution to transfer.
- Same mutual fund only. Transfers go to another scheme of the same fund house.
- Next business day after the record date — not the record date itself.
- It overrides an existing IDCW pay-out or re-investment instruction, and covers all units in that scheme, plan and option.
- The target scheme's minimum application amount does not apply, though the fund may set a minimum IDCW amount for transfer.
- It ends automatically when the source holding becomes nil.
- DTP ≠ STP. An STP transfers a fixed amount (or the appreciation) by redeeming units; a DTP transfers only what is declared as IDCW, which is not guaranteed.
Where this is taught
- Series V-A · Chapter 9: Investor Servicesintroduced here
- Series V-D · Chapter 9: Investor Servicesintroduced here
Related terms
- Record dateThe date on which a company looks at its register and decides who gets the bonus, dividend, rights or split — you must be holding the shares in your demat account at the end of that day.
- Folio numberThe unique account number a fund house allots to an investor, under which the registrar holds that investor's units across every scheme of the fund, along with the bank mandate, address and signature.
- SwitchA single mutual fund transaction that redeems units from one scheme (or option) and invests the proceeds in another on the same date — a redemption and a purchase rolled into one.
- Systematic Transfer PlanA standing instruction to move a fixed amount from one scheme into another of the same mutual fund at a set frequency — a withdrawal plan out of the source and a SIP into the target.
- IDCWThe renamed dividend option of a mutual fund scheme — a payout that is part income and part return of your own capital, which is why the NAV falls by exactly the amount distributed.
- Distributable reservesThe profits a mutual fund scheme may pay out as dividend (IDCW): accrued profits, ignoring valuation gains but deducting valuation losses — so payouts come only from real, realised profit.
- Ticket sizeThe minimum amount an investment requires — from as little as Rs 50 or Rs 100 in some avenues to more than Rs 1 lakh or even Rs 1 crore in others.
- Ex-dividend NAVThe NAV of a scheme after an IDCW has been paid out, lower than before by the amount distributed. Reinvestment of the IDCW happens at this NAV.
- TDS on IDCWTax deducted at source at 10 percent on an IDCW from a mutual fund scheme above Rs 5,000 — applicable even to resident investors, unlike redemption proceeds, which carry no TDS for residents.