Best Monthly Dividend Mutual Funds in India 2026

In April 2021, SEBI renamed the “Dividend Option” in mutual funds to “Income Distribution cum Capital Withdrawal (IDCW)” to improve clarity for investors. Monthly dividend mutual funds, formally referred to as Monthly IDCW (Income Distribution cum Capital Withdrawal) plans, are mutual fund schemes that distribute a portion of their accumulated surplus to investors on a monthly basis. These payouts come from the fund’s distributable surplus, which may include income earned through dividends, interest, or capital gains realised within the portfolio. Below is a list of Dividend Yield Funds along with how IDCW plans work, key metrics to understand, and factors to consider before investing.

List of Monthly Dividend Paying Mutual Funds in India

Here is a list of Dividend Yield Funds based on 5Y CAGR as of 9th March 2026.

Disclaimer: The above list of best dividend paying mutual funds is for educational purposes only and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from the Tickertape Mutual Fund Screener and is subject to real-time updates.

Note: The performance data in the table above is from 9th March 2026 and is derived from the Tickertape Mutual Fund Screener. The table reflects the Growth plan of each scheme. Investors seeking monthly IDCW payouts should check the availability and terms of the Monthly IDCW plan for each fund directly with the respective AMC.

• Plan: Growth (for performance reference)
• Category: Dividend Yield Fund
• 5Y CAGR: Sorted from highest to lowest

Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.

What are Monthly Dividend Mutual Funds?

Monthly dividend mutual funds are mutual fund schemes that offer a Monthly IDCW (Income Distribution cum Capital Withdrawal) plan, under which the fund distributes a portion of its accumulated surplus to investors on a monthly basis.

In April 2021, SEBI replaced the term “Dividend Option” with “Income Distribution cum Capital Withdrawal (IDCW)” across all mutual fund schemes. This change was introduced to improve transparency and address a common misconception, that mutual fund dividends function like company dividends or represent additional income over and above the fund’s returns. 

In reality, IDCW payouts are drawn from the fund’s distributable surplus, which includes both realised income and, in some cases, a portion of the investor’s own invested capital. Each payout reduces the fund’s NAV by the amount distributed per unit. Monthly IDCW plans allow investors to receive these payouts once a month, subject to the fund declaring a surplus available for distribution

Growth Plan vs. Monthly IDCW Plan: What’s the Difference?

When you invest in a mutual fund, you typically choose between a Growth plan and an IDCW plan:

• Growth Plan: All returns generated by the fund, including dividends earned from stocks, interest income, and capital gains, are retained within the fund and reflected in the rising NAV. Investors do not receive periodic payouts; wealth accumulates through compounding over time.
• Monthly IDCW Plan: A portion of the fund’s distributable surplus is paid out to investors each month. The NAV is reduced by the amount distributed per unit after each payout. The compounding effect is lower compared to the Growth plan because returns are not fully reinvested.

Overview of Monthly Dividend Paying Mutual Funds

ICICI Pru Dividend Yield Equity Fund

ICICI Pru Dividend Yield Equity Fund is an equity fund that invests primarily in stocks with relatively higher dividend yields. The portfolio focuses on companies that have a consistent track record of distributing dividends. The fund aims to generate long-term capital appreciation by investing in dividend-paying companies across market capitalisations.

Aditya Birla SL Dividend Yield Fund

Aditya Birla Sun Life Dividend Yield Fund invests in equity and equity-related instruments of companies with above-average dividend yields. The fund aims to provide capital appreciation over the long term through a portfolio of dividend-paying companies. It follows a diversified approach across sectors and market capitalisations.

HDFC Dividend Yield Fund

HDFC Dividend Yield Fund is an equity fund that focuses on companies offering higher dividend yields relative to the broader market. The portfolio includes businesses across sectors that have demonstrated consistent dividend-paying ability. The fund aims to generate long-term capital growth through a dividend yield-oriented investment approach.

Franklin India Dividend Yield Fund

Franklin India Dividend Yield Fund invests in equity and equity-related securities of companies with a focus on dividend yield. The portfolio is spread across sectors and market capitalisations, with a preference for businesses that have shown consistency in distributing dividends. The fund seeks long-term capital appreciation through such dividend-oriented holdings.

LIC MF Dividend Yield Fund

LIC MF Dividend Yield Fund invests predominantly in equity and equity-related instruments of companies that offer relatively higher dividend yields. The portfolio includes businesses across sectors with a track record of dividend payments. The fund aims to generate long-term capital appreciation while maintaining exposure to dividend-yielding companies.

UTI Dividend Yield Fund

UTI Dividend Yield Fund is an equity fund that invests primarily in companies with above-average dividend yields. The portfolio is diversified across sectors and market segments, with a focus on companies that have demonstrated regular dividend-paying capacity. The fund seeks long-term capital appreciation through a dividend yield-based investment strategy.

Sundaram Dividend Yield Fund

Sundaram Dividend Yield Fund invests in equity and equity-related securities of companies offering higher-than-average dividend yields. The portfolio includes businesses across market capitalisations that have a consistent history of dividend payouts. The fund aims to generate long-term capital growth through exposure to such dividend-oriented companies.

Tata Dividend Yield Fund

Tata Dividend Yield Fund is an equity fund that focuses on companies with relatively higher dividend yields. The portfolio includes stocks across sectors and market capitalisations that have shown consistent dividend-paying behaviour. The fund seeks to generate long-term capital appreciation by investing in dividend yield-oriented businesses.

SBI Dividend Yield Fund

SBI Dividend Yield Fund invests in equity and equity-related instruments of companies with higher dividend yields relative to the market. The portfolio is diversified across sectors and market segments, focusing on businesses that have demonstrated the capacity to distribute dividends regularly. The fund aims to generate long-term capital appreciation through such holdings.

Baroda BNP Paribas Dividend Yield Fund

Baroda BNP Paribas Dividend Yield Fund invests primarily in equity and equity-related securities of dividend-yielding companies. The portfolio is structured around businesses with above-average dividend yields across sectors and market capitalisations. The fund aims to generate long-term capital appreciation through a dividend yield-focused equity strategy.

How Does a Monthly IDCW Payout Work?

When a mutual fund declares a monthly IDCW, it sets a record date. Investors who hold units of the IDCW plan on or before the record date are eligible to receive the payout for that month.

The payout is calculated based on the number of units held and the IDCW amount declared per unit. For example, if an investor holds 1,000 units and the fund declares an IDCW of ₹0.50 per unit, the investor receives ₹500 for that month.

After the distribution, the fund’s NAV is reduced by the IDCW amount per unit. This means if the NAV was ₹25 before the payout, it becomes ₹24.50 after the ₹0.50 per unit distribution. The reduction in NAV reflects that value has been transferred from the fund to the investor; it is not a loss but a redistribution.

Key points to keep in mind:

• Monthly IDCW declaration is not guaranteed. It depends on the availability of distributable surplus.
• Payout amounts can vary from month to month.
• The NAV falls by the exact payout amount per unit after each distribution.
• Investors in the Monthly IDCW plan of a fund hold the same underlying portfolio as investors in the Growth plan of the same fund.

Taxation on Monthly Dividend Paying Mutual Funds

Tax on IDCW Payouts

IDCW payouts received from mutual funds are added to the investor’s total income and taxed as per their applicable income tax slab, regardless of whether the fund is equity-oriented or debt-oriented.

If the total IDCW received from a mutual fund scheme exceeds ₹5,000 in a financial year, the AMC is required to deduct Tax Deducted at Source (TDS) at 10% before making the payment. The TDS deducted is adjusted against the investor’s total tax liability when filing returns.

Tax on Capital Gains (at Redemption)

For the Dividend Yield Funds listed above being equity mutual funds, the following capital gains tax rates apply at the time of redemption:

How to Invest in Monthly Dividend Mutual Funds?

You can invest in monthly dividend mutual funds by following these steps:

• Visit an investment platform such as smallcase to access a wide range of mutual fund schemes.
• Go to Tickertape Mutual Fund Screener and under category search for “Dividend Yield Fund”. Filters such as 5Y CAGR, expense ratio, alpha, volatility, and AUM can help narrow down options for further evaluation.
• Once you shortlist a fund, you can complete the investment process by choosing either a lump sum or SIP mode and setting up the mandate.

Who Can Consider Investing in Monthly Dividend Mutual Funds?

• Investors Seeking Periodic Income Without Full Redemption: Monthly IDCW plans allow investors to receive regular payouts from the fund’s distributable surplus without needing to redeem their units. Investors who want periodic liquidity while keeping their remaining corpus invested may find this plan structure relevant to evaluate.
• Investors Who Understand the IDCW Mechanism: Since each monthly payout reduces the fund’s NAV, the total value of an investor’s holding does not increase solely through compounding. Investors who understand that IDCW payouts represent a redistribution of the fund’s value, not additional income, are better positioned to assess whether this plan structure suits their objective.
• Investors Who Have Assessed the Tax Implications: IDCW payouts are taxed as per the investor’s income tax slab. Investors in higher tax brackets should evaluate the after-tax yield of monthly IDCW payouts compared to alternative options before making a decision.

Benefits of Monthly Dividend Mutual Funds

• Regular Monthly Payouts: Monthly IDCW plans distribute a portion of the fund’s surplus to investors each month, subject to availability. This provides a structured payout schedule for investors who have a periodic cash flow requirement from their investments.
• Equity Exposure With Periodic Distributions: Dividend Yield Funds invest in equity stocks of dividend-paying companies. The Monthly IDCW plan allows investors to participate in equity markets while receiving periodic distributions, rather than waiting until redemption for all returns to be realised.
• No Need to Redeem Units for Cash Flow: Investors can receive monthly income from their mutual fund holdings without selling units. This preserves the remaining investment corpus, which continues to participate in the fund’s performance.
• Transparent and Regulated Structure: All mutual funds in India are regulated by SEBI. IDCW distributions are required to be clearly disclosed in the investor’s Consolidated Account Statement (CAS), including the breakdown between income distribution and capital withdrawal, providing transparency on the source of each payout.
  

Risks of Monthly Dividend Mutual Funds

• IDCW Payout is Not Guaranteed: Monthly IDCW payouts depend on the distributable surplus available in the mutual fund. If the portfolio does not generate enough surplus in a particular month, the fund may reduce the payout or skip it entirely. 
• NAV Reduction After Each Payout: Every time the fund declares a monthly IDCW payout, the distributed amount is deducted from the fund’s Net Asset Value (NAV). Over time, if the portfolio does not grow enough between these payouts, the total value of the investment may decrease. 
• Equity Market Risk: Dividend Yield Funds invest mainly in equities. Because of this, their portfolios remain exposed to market fluctuations. When equity markets decline, the fund’s NAV can fall, and the ability of the fund to declare IDCW payouts may also be affected.
• Sector and Stock Concentration Risk: Dividend Yield Funds generally invest in companies that regularly pay higher dividends. These companies are often concentrated in sectors such as utilities, banking, or energy. If these sectors face weak performance or sector-specific challenges, the fund may see sharper declines compared to a diversified equity fund that spreads investments across more sectors.

Factors to Consider Before Investing in Monthly Dividend Mutual Funds

• Understand the IDCW Plan vs. Growth Plan Distinction: Before investing, confirm whether you are selecting the Monthly IDCW plan or the Growth plan of the fund. Both plans invest in the same portfolio, but the Monthly IDCW plan distributes surplus monthly (reducing the NAV), while the Growth plan reinvests all returns. Performance data in the table above is based on the Growth plan and is used for comparative reference only.
• Assess Your Income Tax Bracket: IDCW payouts are taxed as per the investor’s income slab. Investors in higher tax brackets will pay proportionately more tax on each monthly payout. Before choosing the Monthly IDCW plan over the Growth plan, it is useful to calculate the after-tax return in the context of your personal tax situation.
• Check Distributable Surplus History: Since monthly payouts depend on the fund’s distributable surplus, reviewing whether the fund has a consistent history of declaring monthly IDCW and the approximate payout amounts helps in understanding the reliability of cash flows from the scheme.
• Expense Ratio: The expense ratio is the annual cost charged by the fund for portfolio management. A higher expense ratio reduces net returns over time. The expense ratios in this list range from 0.57% to 1.44%, a meaningful spread that is worth comparing across funds within the same category.
• Role in Overall Portfolio: Dividend Yield Funds are equity-oriented and carry the same market risk as other equity mutual fund categories. Investors should assess how a Monthly IDCW plan fits within their broader portfolio, both from an asset-allocation perspective and a cash-flow planning perspective, before allocating to this fund type.

Conclusion

Monthly dividend mutual funds structured as Monthly IDCW plans allow investors to receive periodic distributions from a fund’s accumulated surplus. These payouts are not additional income; they are drawn from the fund’s NAV, which falls by the distributed amount after each payout. The underlying portfolios of Dividend Yield Funds are equity-oriented and carry associated market risk.

Before investing, it is important to understand the IDCW mechanism, assess the tax implications relative to your income bracket, and review the fund’s distributable surplus history, expense ratio, alpha, and volatility. Tools like the Tickertape Mutual Fund Screener provide 50+ filters to compare Dividend Yield Funds across performance, risk, and cost metrics in a structured manner.

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Frequently Asked Questions on Monthly Dividend Mutual Funds