Investing

REC Ltd. (Rural Electrification Corporation) is playing a critical role in securing India’s energy requirement. Started as a nodal agency to develop power infrastructure in rural areas in 1969, it has now transformed itself into a key infrastructure financing company in India, with “Maharatna” status. 

The growth is also reflected in the REC share price. On April 30, 2020, the REC share price was around ₹71.66. Five years later, on 30th April 2025, it was at ₹420, an increase of about 500%. 

In this article, we will analyze the REC share price growth, the company’s potential, and the challenges it may face ahead. Let’s dive in. 

Brief Overview of REC Ltd.

REC Ltd. is a central public sector undertaking company that finances projects in the power sector’s entire value chain, from generation to transmission to distribution.

Started in 1969 to develop power infrastructure in rural areas, the RBI granted NBFC status in 1998 and IFC (Infrastructure Financing Company) in 2010. With an IFC status, the company must deploy at least 75% of its assets in infrastructure financing projects. 

REC was granted Navratna status in 2008. And, due to its exceptional financial performance, the government conferred “Maharatna”, the highest status for PSUs in 2022.

At the end of December 2024, REC has a total loan outstanding of ₹5.65 lakh crore. Looking at the loan portfolio, close to 90% of the borrowers are state-backed companies. 

REC Ltd. Management Team

Shri Jitendra Srivastava is the Chairman and Managing Director of REC Ltd. and is a seasoned civil servant. He is an IAS Officer from Bihar Cadre (2000 Batch). Over the years, he has held key administrative roles and responsibilities across the Government of Bihar and the Government of India.  

Shri Vijay Kumar Singh has been the Director (Projects) of REC Ltd. since July 2022. He holds a B.Tech degree in Electrical Engineering from IIT Roorkee and has over 35 years of experience in the power sector. Before joining REC in 2007, he was with Power Grid Corporation and NTPC. 

Shri Harsh Baweja has been the Director (Finance) and CFO of REC Ltd. since May 2024. A Chartered Accountant by profession, he has experience of over 33 years, handling various roles and managing financial portfolios. 

REC Ltd. Shareholding Pattern

Power Finance Corporation, another systematically important infrastructure finance company, acquired the government stake of 52.7% in REC Ltd. in 2019. LIC of India also holds a 1.35% stake in REC, and the Government of Singapore holds a 1.84% stake. 

Financial Performance

Net Interest Income

REC’s consolidated net interest income reached ₹46,410 crores during FY24, which is around 19.5% higher compared to the previous financial year from ₹38,836 crores. 

In the April to December period (9MFY25), the REC’s NII reached ₹40,158 crores, which is around 18% higher than ₹34,041 crores recorded during the period in 9MFY24. 

Net Profit

REC’s profitability metric is improving. In FY24, net profits of the company increased by 27% to ₹14,109 crores from ₹11,055 crores in FY23. 

For the 9MFY25, the REC’s net profit increased by 15% to ₹11,574 crores from ₹10,066 crores recorded in 9MFY24. 

Key Financial Metrics

Net Interest Margin (NIM)

Net Interest Margin is like the operating margin for banks and NBFCs. In FY24, the NIM of REC Ltd. was 3.57%, improved by 19 basis points year-on-year. At the end of December 2024 (9MFY25), it rose to 3.64%. 

Period	FY23	FY24	9MFY24	9MFY25
NIM (%)	3.38	3.57	3.52	3.64

Cost of Funds

REC Ltd. borrows funds from the market and then loans them to enterprises. Having a lower cost of funds is important for higher profitability and stability of the company. 

The cost of funds for the company is steady and has increased slightly from 7.13% at the end of March 2024 to 7.15% at the end of December 2024. 

Period	FY23	FY24	9MFY24	9MFY25
Cost of Funds(%)	7.28	7.13	7.16	7.15

Asset Quality

REC Ltd.’s client concentration is government-backed entities, which lowers the risk of default or non-payment of dues. 

The company’s asset quality has improved significantly over the last two years, with Net Credit-Impaired Assets reducing from 3.28% in June 2023 to 1.95% at the end of December 2024. 

Period	Jun 23	Sep 23	Dec 23	Mar 24	Jun 24	Sep 24	Dec 24
Net Credit-Impaired Assets (%)	3.28	3.14	2.78	2.71	2.61	2.53	1.95

Provision Coverage Ratio (PCR)

PCR measures how well the bank or NBFC is positioned to absorb the losses from bad loans.  It is calculated by dividing the provisions set aside for bad loans by total gross NPAs.

REC Ltd.’s PCR has reduced from 70% in Jun 2023 to 62% at the end of Dec 2024. This may be due to the lower risk of default by enterprises. 

Period	Jun 23	Sep 23	Dec 23	Mar 24	Jun 24	Sep 24	Dec 24
PCR (%)	70.46	69.37	70.41	68.45	68.48	65.12	61.88

Capital Adequacy Ratio (CAR)

The Capital Adequacy Ratio shows how well the bank or financial institution can absorb losses if any good loan suddenly becomes bad or in times of financial distress. 

REC Ltd. has a CAR of 25.33% at the end of December 2024, which is higher than the regulatory requirement. 

REC Share Price Analysis

REC Ltd. was listed on the stock market in 2008, and its IPO was oversubscribed 27 times. 

Despite the strong IPO subscription, the REC share price growth failed to match investors’ expectations. Since its listing in 2008, the REC share price traded range-bound between ₹60 and ₹160 levels until 2023. 

REC share price made an all-time high of ₹654 on 1st July 2024. 

REC Ltd. classifies itself as a high-dividend-paying company. Over the years, it has increased its dividend payments to shareholders. In the last five years, it has doubled its dividend payouts from 82% (₹8.2 per share) of its equity share capital to 160% (₹16 per share). 

In terms of dividend payout ratio, a significant percentage of profit is paid as dividends is steady at 30%. At ₹420, the dividend yield of the REC share price is 3.81%. 

Key Valuation Metrics

Earning Per Share (EPS)

The following is the EPS of the REC Share Price of the last 5 years:

FY20	₹18.88
FY21	₹31.82
FY22	₹38.11
FY23	₹42.41
FY24	₹53.72
9MFY25	₹43.95

REC share price growth is driven by a steady rise in its Earnings Per Share over the last five years.

Price-to-Book VS Median Price-to-Book

The book value per share of REC Ltd. is ₹279. As of 1st May 2025, the REC share price is trading at 1.5 times and the 5-year Median Price-to-Book is 0.7 times, indicating the REC share price is trading at slightly expensive valuations. 

However, the valuations are slightly down. The price-to-book ratio has declined from 2.5 times to 1.5 times in the last six months

Source: Screener

REC Share Price Future Growth Potential 

REC Ltd. has a diversified loan portfolio with a mandate of up to 33% loans in the infrastructure and logistics sectors. It focuses on sectors like metro, port waterways, airport, oil & refinery, roads & highways, IT infra, steel infra, and the health sector.

The management has guided the loan book to grow at ~15-17% for the years to come and reiterated its confidence of reaching a loan book of ₹10 lakh crore by 2030. 

Focus on Renewable Sector

In recent years, it has increased its focus on renewables, including hydro. In FY24, it disbursed 38% of the sanctioned loan to the renewable energy sector. The company plans to have 30% of the projected loan book of about ₹10 lakh crore in renewables, including nuclear energy, by 2030. 

International Expansion

REC Ltd. is expanding its financing activities beyond borders. It has sanctioned a green hydrogen ammonia project in Oman. And, it is also exploring financing international transmission line projects in Sri Lanka, Bhutan, Nepal, and Bangladesh. 

Strategic Borrowing Plan

REC Ltd. has stable credit ratings for long-term borrowings from international as well as domestic credit rating agencies. It helps to raise funds from the market at competitive rates with a mix of domestic and international sources. 

REC is also one of the four companies allowed by the Government of India to raise low-cost 54EC capital gain tax-exempt bonds. In September 2024, it raised $500 million through the issue of green bonds to support renewable energy initiatives. These are 5-year bonds having a coupon rate of 4.75% per annum. 

Such an arrangement helps REC to optimize its capital structure and generate higher returns for shareholders. 

Key Risks

REC Ltd. benefits from its unique business structure and high client concentration of state-backed entities. In a recent management commentary, REC will be increasing lending to private sector enterprises to 30% by 2030. 

Also, REC is lending to infrastructure projects beyond its core business of lending to power projects, which can add to risks.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Introduction

In today’s fast-paced digital era, investing is no longer restricted to stockbrokers sitting behind terminals. With the rise of smartphones and fintech innovations, trading in the stock market is now at your fingertips. Whether you want to dabble in equity, mutual funds, commodities, or derivatives, the best trading app can access real-time data, powerful tools, and seamless execution — anytime, anywhere.

India’s retail investor base is growing rapidly, largely thanks to the convenience offered by online trading apps. From metro cities to tier-2 towns, people embrace digital platforms to build wealth. But with dozens of options available, selecting the best trading application can be overwhelming, especially for beginners.

This article simplifies the process by presenting the Top 10 Best Trading Apps in India in 2025, ranked based on performance, features, user interface, and customer trust.

Benefits of Trading Apps Today

The rise of online trading apps has transformed how Indians participate in the stock market. From simplifying investing for first-time users to offering advanced tools for seasoned traders, these platforms have become an essential part of the modern investment journey. Here’s a closer look at why trading apps are convenient and necessary in today’s digital-first world.

1. Anytime, Anywhere Access to Markets: One of the biggest reasons behind the success of the best trading app platforms is the ability to trade anytime, anywhere. With a smartphone and internet connection, users can place orders on NSE/BSE, track global indices in real-time, and stay updated with their portfolio 24/7. This convenience has made investing more accessible, especially for those who want to take charge of their finances through an efficient online trading app.

2. Empowering the New-Age Investor: Modern investors seek flexibility and direct control. Whether a student starting early or a working professional diversifying income, everyone wants to avoid the traditional brokerage route. The best trading applications today offer intuitive dashboards, personalised watchlists, and real-time portfolio views, making investing less intimidating. This independence is a key reason many are shifting toward online trading platforms.

3. Real-Time Data and Alerts: Timing is everything in trading, and online trading apps now provide live price updates, technical charts, and market alerts that help users react instantly. Gone are the days of waiting for your broker to call. With the best trading app in your pocket, you can respond immediately to market movements, company earnings, or global events, giving seasoned investors and first-timers a much-needed edge.

4. Cost Efficiency with Zero Brokerage Options: One of the major appeals of using the best trading app in India is the cost advantage. Apps like Zerodha and Upstox follow a zero or flat-fee model, offering ₹0 brokerage on delivery trades and low-cost intraday or F&O trading. This pricing model makes the best trading application especially attractive to new investors who want to keep costs low while learning the ropes.

5. Educational Tools for Beginners: The best trading app for beginners does not just offer a place to trade — it becomes a learning ground. These apps, from in-app tutorials and market blogs to interactive videos and simulators, help users build financial literacy while investing. This educational support is a primary reason why online trading apps are preferred by first-time investors looking for guidance and clarity.

6. Integrated Investment Ecosystem: Today’s online trading app is more than just a stock market tool. The best applications for trading now include mutual funds, ETFs, gold, IPOs, bonds, and even global stocks, all on one platform. This holistic offering helps users diversify their portfolios without juggling multiple apps, streamlining their investment experience under one digital roof.

7. Seamless Digital Onboarding: Opening a trading and Demat account has become seamless with Aadhaar-based eKYC, instant PAN verification, and quick bank integration. What once took days now takes just minutes through the best trading app. This digital onboarding has brought millions of new investors, especially from small towns and rural India, into the financial mainstream.

8. Secure and Transparent Transactions: Security remains a top priority for any online trading app. The best trading apps for beginners like Angel One or ICICI Direct also provide access to customer support and regulatory alerts, ensuring a trustworthy environment for retail investors.

Top 10 Best Trading Apps in India 2025

Here’s an updated and detailed table for the Top 10 Best Trading Apps in India 2025, focusing on key features and who each platform is best suited for.

S. No	App	Key Features	Suitable For
1.	Zerodha Kite	Fast interface, advanced charting tools, Coin for mutual funds, integrated with Trading View for technical analysis.	Active traders, technical analysts, and long-term investors who want a reliable, comprehensive platform.
2.	Upstox	Clean user interface, customisable watchlist, real-time data, advanced charting tools, fast execution.	First-time investors and millennials are looking for an easy entry into trading and investing.
3.	Groww	Seamless integration with ICICI Bank accounts, mutual funds, stocks, ETFs, zero brokerage on delivery trades, and extensive research tools.	User-friendly interface, investment options for mutual funds, stocks, and SIPs, and instant account opening.
4.	Angel One	Investors are looking for active trading and long-term investment opportunities, especially those focusing on research and automation.	ARQ Prime (AI-based investment engine), free research reports, SmartAPI for automation, and advanced charting tools.
5.	ICICI Direct Neo	Seamless integration with ICICI Bank accounts, mutual funds, stocks, ETFs, zero brokerage on delivery trades, and extensive research tools.	ICICI customers, conservative investors, and anyone looking for banking + trading integration.
6.	5Paisa	Smallcase investment options, robo advisory, low-cost trading, SIP options, and free portfolio management.	DIY investors who want flexibility and more investment choices, including robo-advisory services.
7.	Dhan	Fast execution, advanced options trading tools, access to real-time data, easy-to-use app, API access for algo trading.	Active traders and algo developers, especially those focusing on options and high-frequency trading.
8.	Fyers	Integration with TradingView, custom technical analysis tools, multi-chart setup, options trading tools, and backtesting.	Technical traders, investors who rely heavily on charts, and those focusing on options or intraday trading.
9.	Paytm Money	Mobile-first approach, zero brokerage on equity, simple and quick account setup, wide range of investment options including IPOs and NPS.	Paytm users, mobile-first traders, and beginners looking for an intuitive, easy-to-use platform for stocks, mutual funds, and IPO investments.
10.	Kotak Neo	Full integration with Kotak Bank accounts, flat-fee pricing, easy onboarding process, research reports, and portfolio management tools.	Kotak customers, new traders looking for an integrated experience between banking and investing.

Detailed Review of Each Trading App:

1. Zerodha Kite: Zerodha remains one of the best trading apps in India in 2025 due to its robust performance and seamless user experience. Known for its fast, easy-to-use interface, Zerodha Kite provides real-time data, advanced charting tools, and integration with TradingView, making it perfect for technical traders. The platform also offers Coin, allowing users to invest in mutual funds easily. Zerodha is ideal for those who want the best trading application with advanced features and ease of use.

2. Upstox: Upstox is also one of the best trading app for beginners due to its intuitive interface and easy navigation. The app offers customisable watchlists, real-time data, and fast execution speeds, making it an excellent choice for anyone looking to start their trading journey. Additionally, Upstox offers advanced charting tools for more experienced traders, while still being user-friendly for newcomers to the market. If you are new to the trading world, this app is a solid online platform.

3. Groww: Groww is the best application for beginners looking for a simple and efficient entry into trading. Known for its easy-to-use interface, Groww offers a range of investment options like stocks, mutual funds, and SIPs, making it ideal for someone just starting their investment journey. The app’s ability to open accounts instantly, combined with real-time data, ensures that users have everything they need at their fingertips. Groww is a great online trading app for first-time investors.

4. Angel One: Angel One (formerly Angel Broking) is a well-rounded trading app that caters to both active traders and long-term investors. The app features ARQ Prime, an AI-driven investment engine, and provides users with access to free research reports and smart APIs for automation. If you want a blend of active trading tools and long-term investing options, this trading app is an excellent choice.

5. ICICI Direct Neo: ICICI Direct Neo is one of the best online trading apps for those who value a seamless experience between their bank and trading platform. The app offers a range of investment options, including stocks, ETFs, and mutual funds, along with zero brokerage on delivery trades. Integrated with ICICI Bank, this trading app is a great choice for bank customers or conservative investors seeking a well-established platform.

6. 5Paisa: 5Paisa is designed for investors who want flexibility, making it the best trading application for DIY investors. With low-cost trading, robo-advisory services, SIP options, and Smallcase investments, this app offers everything you need to manage your portfolio. Whether you are an experienced investor or someone looking to learn, 5Paisa delivers a great online trading app experience.

7. Dhan: Dhan is an ideal best trading app for active traders who need fast execution and advanced tools for options trading. With real-time market data, backtesting features, and API access for algorithmic trading, Dhan is a highly reliable platform for traders looking to optimize their strategies. If you are an options trader or an algo developer, this app offers the technical edge you seek.

8. Fyers: For those who rely heavily on technical analysis, Fyers is the best trading app for technical traders. The app integrates seamlessly with TradingView, offering multi-chart setups, custom indicators, and advanced options trading tools. Fyers also provides backtesting, making it an excellent option for online trading app users prioritizing data-driven strategies.

9. Paytm Money: With its simple user interface and mobile-first approach, Paytm Money is the best trading app for beginners. The app offers zero brokerage on equity delivery, allowing users to trade stocks, IPOs, and mutual funds easily. Paytm Money is perfect for those who are already using it and want to manage their investments seamlessly without any complexity.

10. Kotak Neo: Kotak Neo is the best trading app for those with a Kotak Bank account. The app offers zero brokerage across all segments (currently promotional). It integrates well with the bank’s services, making it easier for users to manage their trading and banking activities in one place. Kotak Neo is a solid choice if you are a Kotak customer looking for a seamless banking and trading experience.

In conclusion, choosing the best trading app in India depends on individual needs and trading preferences. Whether you are a beginner looking for the best application for trading, like Groww or Upstox, or a seasoned investor searching for advanced tools and real-time data from apps like Zerodha or Fyers, the market offers plenty of options. The online trading app landscape has evolved to provide user-friendly interfaces, zero brokerage models, and diverse investment options, empowering investors to easily manage their portfolios.

FAQs

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Section 11 of the Income Tax Act, 1961, offers a significant tax relief mechanism for charitable and religious institutions in India. It allows exemption on income derived from property held under trust wholly for charitable or religious purposes, provided certain conditions are met. This provision is vital in encouraging philanthropic activities while ensuring accountability and regulation.

This guide explains the essential features of Section 11, eligibility criteria, types of income exempted, and conditions required for charitable trusts to benefit under this section. We will also explore related provisions like Section 11(5) of Income Tax Act, Section 12A, Section 12AA, and Section 13. 

Additionally, it highlights how compliance with indirect tax regulations can impact the overall tax benefits available to trusts.

Understanding Section 11: Tax Exemptions for Charitable Trusts 

The primary objective of Section 11 of the Income Tax Act is to grant tax exemptions to income derived by charitable or religious trusts if the income is applied solely to the trust’s purposes. This enables organizations to maximize their use of funds for societal benefit instead of paying taxes.

When evaluating tax benefits, it’s important to understand the new vs. old tax regime’s implications, especially in how deductions and exemptions like those under Section 11 are treated. Charitable purposes under Section 2(15) of the Act include education, medical relief, relief to the poor, and advancement of any other object of general public utility. Religious activities are also covered under the exemption.

Additionally, Sections 10 and 11 of the Income Tax Act explain the types of income that are tax-free for certain institutions. This helps organizations plan their charitable activities better while following tax rules and using their funds more efficiently.

Eligibility Criteria for Section 11 Exemption

For a trust or institution to claim exemption under Section 11, it must meet the following conditions:

• It should be registered under Section 12A or Section 12AA of the Income Tax Act.
• Income must be applied or accumulated for the stated charitable or religious purposes. 
• The accounts must be audited if the income exceeds the basic exemption limit. 
• The trust must not use income for the benefit of any specified person as defined in Section 13.
  

Types of Income Eligible for Exemption under Section 11

The types of income eligible for exemption under Section 11 include:

• Income from property held under trust. 
• Income from voluntary contributions (not being corpus donations). 
• Capital gains, if reinvested as per the provisions. 
• Income derived from business, if the business is incidental and separate books are maintained.
  

Income Eligible for Exemption Under Section 11

Some specific types of income that are exempt under Section 11 Income Tax Act include:

• Rental income from properties owned by the trust.
  
• Donations received for specific charitable purposes (not forming part of the corpus).
  
• Interest earned from investments made through permissible modes as per Section 11 5 of Income Tax Act.
  
• Income from activities like running schools, hospitals, or vocational training centers.
  

Incomes Explicitly Excluded from Section 11 Exemption

Not all income is eligible. The following are explicitly excluded:

• Income from activities not aligned with the declared charitable purposes.
  
• Anonymous donations (subject to tax under Section 115BBC).
  
• Corpus donations not used according to norms.
  
• Income used for the personal benefit of trustees or relatives violates Section 13.
  

Treatment of Capital Gains for Charitable Trusts

Capital gains are exempt under Section 11 if:

• They are reinvested in new capital assets.
• The reinvestment occurs within the prescribed time limit.
• The trust continues to use the new asset for charitable purposes.
  

If capital gains are not utilized accordingly, they will be taxed under the normal provisions of the Act.

Key Conditions for Claiming Tax Exemption Under Section 11

To avail of the benefits of Section 11, a trust must:

• Apply for registration under Section 12A using Form 10A.
  
• Get the registration approved by the Commissioner of Income Tax.
  
• Renew registration if there’s a change in objectives or activities.
  

Maintaining Proper Records and Documentation

To ensure tax exemption:

• Trusts must maintain separate books of accounts.
  
• Keep records of donations, expenses, and application of income.
  
• File annual returns in Form ITR-7.
  

Compliance Requirements and Penalties for Non-Compliance

Non-compliance may lead to:

• Cancellation of tax exemption status.
  
• Taxation of the entire income at the maximum marginal rate.
  
• Penalties under various sections, including Section 271(1)(c).
  

Hence, it is crucial for charitable institutions to adhere strictly to compliance requirements.

Section 11(2): Accumulation of Income by Charitable Institutions

Under Section 11, a trust can accumulate up to 15% of its total income without specific conditions. This accumulation helps organizations build a financial cushion for future use.

Consequences of Exceeding the 15% Limit

If a trust accumulates more than 15%, it must:

• File Form 10 before the due date.
  
• Specify the purpose and period (maximum five years) of accumulation.
  
• Invest the amount in modes specified under Section 11 5 of Income Tax Act.
  

Failure to comply will result in the excess accumulation being taxed as income.

Application and Use of Accumulated Income

Accumulated income must be used within the specified period. If not:

• It will be treated as income in the year of expiry.
  
• The exemption under Section 11 Income Tax Act for that amount will be denied.
  
• Trusts must furnish explanations and documents to avoid penalties.
  

Section 11(4): Business Held as Trust

Tax Implications of Business Activities Conducted by Trusts

Charitable trusts may run businesses provided:

• The business is incidental to the objectives.
  
• Separate books of accounts are maintained.
  

For example, a charitable hospital running a pharmacy store is allowed if the earnings are used for medical relief.

Specific Rules and Regulations for Business Income

Under Section 11(4), business income is exempt only if:

• The business is not profit-driven.
  
• Profits are plowed back into charitable work.
  
• Violations lead to the loss of exemption status and taxation under regular income tax rules.
  

Section 11(5): Permitted Modes of Investment for Income Tax Exemption 

Approved Investment Avenues for Exempt Income

To maintain tax exemption, trusts must invest their funds only in permitted avenues such as:

• Government savings certificates.
  
• Post office savings accounts.
  
• Scheduled bank fixed deposits.
  
• Units of mutual funds (as notified).
  
• Bonds and debentures of public sector companies.
  

These investments ensure transparency and safety.

Restrictions on Investments

The trust cannot invest in:

• Shares of private companies.
  
• Stock investments unless approved.
  
• High-risk instruments not listed under Section 11 5 of Income Tax Act.
  

To ensure compliance, consulting a stock investment advisor is recommended before making any large financial moves.

Tax Treatment of Voluntary Donations Received by Charitable Organizations

Donors contributing to registered charitable institutions can claim deductions under Section 80G, subject to:

• Trusts having valid registration.
  
• Contribution not exceeding prescribed limits.
  

This provides incentives for individuals and corporations to support charitable causes.

Tax Implications for the Receiving Charitable Organization

For trusts, voluntary donations are generally treated as income under Section 11, except:

• Corpus donations (capital donations) are excluded if used as per the guidelines.
  
• All non-corpus donations must be applied for charitable purposes to retain the exemption.
  

Improper use may result in taxation and potential violation of Section 13 conditions.

Conclusion

Understanding incomes exempted under Section 11 of the Income Tax Act, 1961, helps charitable trusts legally optimize tax benefits. While such exemptions promote welfare, it’s essential to differentiate them from revenue sources like windfall tax, which applies to unexpected gains and not to regular or exempted charitable income.

FAQ

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Investing in mutual funds often introduces new terms that can seem confusing. One such term that investors commonly come across is IDCW. You might have noticed it in your mutual fund statements or heard it from share market advisory services.

These services often help investors decode complex mutual fund terminology, ensuring better financial decisions and optimized returns. They also explain fundamentals like what is income tax, helping investors understand how taxes impact investment choices.

Why IDCW Is a Common Term in Mutual Fund Statements

IDCW in mutual funds has become a standard label replacing what was earlier called “dividend option.” If you’ve ever seen money being credited to your account from a mutual fund, chances are, it was under IDCW.

Demystifying IDCW for New Investors

For first-time or casual investors, IDCW might sound complex. This guide will help you understand what is IDCW in mutual fund, how it works, its pros and cons, and when you should consider it. A key factor to consider while evaluating IDCW is the income tax concept linked to it. 

Unlike the growth option, where returns are realized only on redemption and may attract capital gains tax, IDCW payouts are taxed based on your income slab as per the income tax concept. This means the distributed amount is added to your total taxable income, which could impact your overall tax liability. Understanding this taxation aspect is crucial before opting for IDCW in your investment strategy.

What is IDCW in Mutual Fund?

The full form of IDCW is Income Distribution cum Capital Withdrawal. It is a term introduced by SEBI (Securities and Exchange Board of India) in 2021 to replace the word “dividend” in mutual funds.

IDCW Meaning in Simple Terms

IDCW meaning in mutual fund is simple: When a mutual fund earns a profit (through interest, dividends, or capital gains), it can share a part of that income with its investors. This shared amount is what we call IDCW. The money is either paid out to you or reinvested, depending on your preference.

In other words, IDCW allows you to receive periodic payments from your mutual fund holdings.

Why AMCs Use IDCW Instead of “Dividend Option”

Earlier, mutual fund schemes used the word “dividend” to describe payouts to investors. However, this was confusing because the payouts were not always from actual profits. Sometimes, they included your invested capital as well. To clarify this, SEBI mandated the use of the term “IDCW,” as it better describes the nature of these payments—part income, part capital withdrawal.

How IDCW Works in Mutual Funds

How Fund Houses Distribute Income Through IDCW

Fund houses, called Asset Management Companies (AMCs), accumulate investment returns. When they choose to distribute this income, they declare an IDCW. This gets paid to investors who hold the units on the record date.

The amount and frequency of IDCW depend on the scheme’s performance and the AMC’s decision.

Modes of IDCW: Payout vs Reinvestment

There are two ways IDCW can be delivered:

• IDCW Payout: The amount is credited directly to your bank account.
  
• IDCW Reinvestment: The amount is used to buy more units of the same mutual fund scheme.
  

Both options serve different investment needs and can impact your overall returns.

Example: IDCW Flow with NAV Impact

Let’s say you hold 1,000 mutual fund units with a NAV (Net Asset Value) of ₹20. The AMC declares an IDCW of ₹1 per unit.

• You receive ₹1,000 (1,000 units x ₹1).
  
• After this payout, the NAV drops to ₹19.
  

This shows that the money you received was deducted from the fund’s value — hence the term “capital withdrawal.”

IDCW vs Growth Option in Mutual Funds

Key Differences Between IDCW and Growth Funds

Here’s how the two differ:

Feature	IDCW Option	Growth Option
Distribution	Regular Income	No distribution: wealth accumulates
NAV Impact	Drops after each IDCW Payout	NAV keeps compounding
Tax Treatment	Taxed as per individual slab	Taxed only at redemption
Suitability	Investors needing periodic income	Long-term wealth builders

When to Choose IDCW vs Growth Option

• Choose IDCW if you need regular income (e.g., retirees).
  
• Choose Growth if you want to build long-term wealth and benefit from the power of compounding.
  

Is IDCW Beneficial for Investors?

Pros of IDCW in Mutual Funds

1. Regular Income: Ideal for investors seeking periodic cash flows.
   
2. Liquidity: You get money without selling your mutual fund units.
   
3. Psychological Benefit: Receiving payouts can give a sense of returns, even when markets are flat.
   

Cons and Taxation Implications of IDCW

1. Not Always from Profits: Part of the IDCW may be from your invested capital.
   
2. Reduces NAV: Since NAV drops after payout, it limits long-term compounding.
   
3. Tax Burden: IDCW is taxable at your income tax slab, making it less efficient than the growth option (where long-term capital gains tax is often lower).
   

Who Should Consider IDCW Options?

• Retired individuals who rely on a steady income.
  
• Conservative investors are looking for cash flows rather than capital appreciation.
  
• Investors with short-term financial goals.
  

Recent SEBI Regulations and IDCW Classification

Changes From “Dividend Plan” to “IDCW”

In April 2021, SEBI replaced the term “Dividend Plan” with “IDCW” to prevent misinterpretation. This was a significant move to improve transparency.

Earlier, investors assumed dividends meant the fund was performing well. But payouts were sometimes made by dipping into the investor’s capital. The new term — IDCW in mutual funds — indicates the nature of the payout.

How it Affects Fund Labeling and Communication

• All mutual fund schemes now show “IDCW” instead of “dividend.”
  
• Fact sheets, portfolio statements, and marketing materials have adopted the new terminology.
  
• It helps investors make informed choices based on facts, not assumptions.
  

Conclusion

IDCW full form in mutual fund is Income Distribution cum Capital Withdrawal. Unlike regular profit-sharing, IDCW may also return a portion of your invested capital, not just earnings. This means the mutual fund’s Net Asset Value (NAV) drops after an IDCW payout, which can affect your long-term returns.

Now that you understand  IDCW in mutual fund, it’s important to align your investment choices with your financial goals. If you need regular income, IDCW mutual fund options may be suitable. However, if long-term wealth creation is your priority, the growth option typically offers better compounding benefits. Always evaluate both options by considering taxation, reinvestment potential, and your income needs.

FAQs

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

When you invest in a mutual fund, you’re looking at past performance, fund manager expertise, or NAV (Net Asset Value). But there’s another critical factor that many investors often overlook: the cut-off time for mutual fund transactions. Understanding this can directly influence the returns you get, especially if you’re dealing with large sums or volatile market conditions.

Additionally, while focusing on returns, don’t ignore associated costs like the indirect tax on specific transactions, which can slightly reduce your net gains. Awareness of timing and tax implications ensures smarter, more informed investment decisions.

Why Cut-Off Times Matter When Investing in Mutual Funds

Cut-off times determine which day’s NAV (Net Asset Value) you get for your mutual fund transaction — whether you’re investing (purchasing units) or withdrawing (redeeming units). A few hours can make a big difference, particularly when markets rise or fall sharply.

How NAV is Affected by Purchase and Redemption Timings

NAV is calculated at the end of each trading day based on the value of the fund’s underlying assets. Whether you get today’s NAV or tomorrow’s depends entirely on when your transaction is time-stamped and processed, which is where the mutual fund NAV cut-off time comes into play.

What is Mutual Fund Cut-Off Time?

The cutoff time for mutual fund investments refers to the specific deadline by which your transaction (purchase or redemption) must be submitted to receive the NAV of that particular day. If you miss the cutoff, you will get the next business day’s NAV.

This applies to all types of mutual funds—equity, debt, and liquid—and the outcome can vary depending on whether you transact before or after the defined cut-off time.

SEBI Rules Around Cut-Off Time for Mutual Fund Transactions

SEBI (Securities and Exchange Board of India) has established standard cut-off timings for various types of mutual funds. These rules ensure fairness and transparency for all investors.

As per SEBI guidelines, NAV allotment is not just about the time you place an order, but also whether funds are received by the AMC (Asset Management Company) before the deadline.

Mutual Fund Purchase Cut-Off Time

Cut-Off Time for Same-Day NAV on Mutual Fund Purchases

• For equity and debt mutual funds, the mutual fund purchase cut off time is 3:00 PM.
  
• For liquid and overnight funds, the cut-off is 1:30 PM.
  

If the fund house receives the money and the order is time-stamped before these times, you’ll get the same-day NAV. Otherwise, you’ll get the next working day’s NAV.

Timings for Liquid vs Non-Liquid Mutual Funds

Liquid/Overnight Funds: 1:30 PM
Investments in liquid or overnight mutual funds must be submitted before 1:30 PM to get the same day’s NAV. Submissions after this apply the next business day’s NAV.

Non-liquid Funds (Equity/Debt): 3:00 PM
For equity and debt mutual funds, investments must be placed before 3:00 PM to receive the same day’s NAV. Orders post this cutoff are processed using the next business day’s NAV. Due to their short-term nature, liquid funds have an earlier cut-off because they are sensitive to daily interest rate fluctuations.

Scenarios: Online vs Offline Transactions

• Online Transactions: Online Platforms and other stock market advisory services often process transactions instantly if they are made before the cut-off. However, bank fund transfers must also clear in time.
• Offline Transactions: These involve more time, as forms must be submitted and verified. It’s safer to assume an additional buffer of 1-2 hours.

Mutual Fund Redemption Cut-Off Time

Timings for Redeeming Mutual Funds and Getting Exit NAV

For mutual fund redemption cut-off time, the rule is the same:

• Redemption Cut-off Time: 3:00 PM (All Fund Types)
  For mutual fund redemptions, whether equity, debt, or liquid, the cut-off time is uniformly 3:00 PM. Timing impacts which day’s NAV will be applied to your redemption.
• Orders Before 3:00 PM – Same-Day NAV
  If you place your redemption request before 3:00 PM, you receive the same day’s Net Asset Value (NAV), ensuring quicker processing and potential alignment with market movements.
• Orders After 3:00 PM – Next-Day NAV
  Redemption requests submitted after 3:00 PM are processed using the next business day’s NAV. This delay may affect the payout value, depending on market fluctuations after submission.

Implications of Cut-Off Time on Withdrawal Proceeds

Missing the redemption cut-off may lead to a loss, especially if the markets crash the next day. Always plan your redemptions keeping this in mind. Also, actual money credit to your bank can take 1-3 business days, depending on the fund type.

Mutual Fund NAV Cut-Off Time: How NAV is Calculated

When You Get Same-Day vs Next-Day NAV

NAV is calculated post-market close (after 3:30 PM) each business day. You get today’s NAV if your transaction is fully completed (including fund transfer) before the cut-off. If not, it rolls over to the next day’s NAV.

This timing becomes especially crucial during high market volatility when NAVs swing more than usual.

Difference in NAV Applicability Based on Transaction Timing

Let’s say you make a purchase order at 2:45 PM, but the fund transfer doesn’t happen till 3:30 PM. In this case, you may still get the next day’s NAV despite placing your order in time because the money wasn’t received before the cut-off.

Cut-Off Time for Mutual Fund Investment: Key Points to Remember

Bank Working Hours and Transaction Clearance

Banks play a significant role here. If transferring funds using NEFT/RTGS, ensure it clears before 3 PM. Delays in interbank transfers can lead to next-day NAV.

Impact of UPI/Netbanking Timings on Cut-Off Compliance

With UPI and IMPS, fund transfer is usually instant. However, large-value transactions may require additional authorization, which might delay processing. So, do not assume real-time execution for every online transaction.

Common Mistakes to Avoid

1. Missing the Cut-Off and Getting Next-Day NAV

Many investors assume submitting an order is enough. But if the funds don’t reach the AMC before the cut-off, you lose out on today’s NAV, which can be costly in a falling market.

2. Assuming Real-Time Processing for All Transactions

Even though your app or broker might say “order placed successfully,” backend processing can be delayed. Always account for buffer time.

3. Not Considering Bank Holidays and Processing Delays

Even if it’s a working day for AMCs, bank holidays can mess up your fund transfer. Always check the calendar before making significant or urgent investments or redemptions.

Conclusion

Understanding the cut-off time for mutual fund transactions is crucial for smart investing. Whether you’re looking to invest or redeem, your gains can vary significantly just by a few hours.

Always confirm with your broker or fund house for fund-specific rules and processing timelines. Timing it right can help you make the most of your mutual fund journey. Remember, every rupee counts when you’re compounding over time.

Also, keep in mind broader financial implications. For example, under the new vs old tax regime, your mutual fund redemptions could affect your tax slab. In windfall gains (especially with equity mutual funds), windfall tax considerations might come into play.

FAQs

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.