Most Mutual Fund schemes have a Growth Option and an IDCW (Income Distribution cum Capital Withdrawal) Option. An IDCW Option (earlier called Dividend Option) in Mutual Funds distributes its profits to the unit holders. This distribution happens from profits the fund makes from income of its investments and capital gains. Once profit is distributed, the NAV becomes lower to that extent. The NAV of the IDCW Option is hence lower than the Growth Option of the same Mutual Fund scheme. You will pay tax on income received by you under the IDCW Option at the tax rate applicable to you.