Ch.7 · NAV Calculation Rules · hard
What is a 'dividend reinvestment plan' (IDCW reinvestment) and its NAV impact?
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EXPLANATION
In IDCW reinvestment, the distributed amount is not paid out in cash but used to buy additional units at the ex-IDCW NAV. Example: 100 units at NAV ₹30, IDCW ₹5 declared. After ex-date: NAV = ₹25. IDCW reinvested = ₹500 → buys 500/25 = 20 additional units. Investor now holds 120 units at ₹25 = ₹3,000 (same as before). Tax is still payable on the distribution even though reinvested.
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