Most mutual fund schemes come in three options - dividend, dividend reinvestment and growth. The fact that under the dividend option the fund keeps on declaring regular dividends and no such payments accrue under the growth option might suggest to some investors that the former are more yielding. However, the truth is that it does not make a dime of difference which option you choose, from the pure investment-yield point of view. The form in which you choose to receive the gains might have tax implications though.
When your fund pays out a dividend all it has done is - paid out the gains it has generated instead of accumulating it. So now the onus of investing this money falls back on you. Moreover, any dividend paid means that the fund pool is smaller by the amount of the payout and this is reflected in the lower NAV. Had the fund not paid the dividend, it would have been reflected in the higher NAV of the fund and as a result the value of the units held by you would have appreciated which you would have realised on redemption. Under the dividend reinvestment option, the same dividend amount as paid under the dividend option is paid. However, instead of an absolute amount, the dividend is paid in the form of higher units issued to the investor.
There is a caveat, though. Investors should opt for that option that minimises their tax liability. If dividend income is tax-free (as is the case with dividends from equity funds), then the dividend option or the dividend reinvestment option is a good bet. If capital gains are tax-free (as is the case currently with equity-oriented funds) then choosing the growth option would probably be more viable. If both are tax-exempt, the net returns will be identical from any option.
What is BHIM? BHIM stands for Bharat Interface for Money , which is an easy way of transferring money from one bank account to an other via a smartphone using the Unified Payments Interface (UPI) platform . It is an instant payments application meant for sending money as well as requesting for payments. How is it different from UPI? BHIM is no different than UPI. But in the case of BHIM, customers don't have to download mobile applications of multiple banks, instead a single BHIM app downloaded from Android Play Store is sufficient. Other than that, payments can be made through a virtual payments ID or through account number and IFS code, same as UPI. What you need to use BHIM? BHIM can be used across an droid smartphones with version 4.0 and above, also it will be made available on iPhones and Windows smartphones very soon. Further, for feature phone users they need to use the USSD feature by dial ing *99#. Why was the need for BHIM felt when UPI is already in place? With various...
