A dividend shares a profit. An IDCW returns your capital.
01
An IDCW is a withdrawal, not a yield. The NAV falls by the exact payout the same day. SEBI renamed it from Dividend to IDCW in 2021 to stop people reading it as free income.
02
The payout is taxed at your slab the year it lands. Growth defers tax to redemption at 12.5 percent and lets the un-taxed rupees keep compounding. Yearly slab tax versus deferred LTCG is the whole gap.
03
Want a regular income. Take it yourself with a withdrawal from the Growth plan, where only the gain portion is taxed and you pick the amount, instead of letting the fund decide and tax the lot.
A dividend from a company is profit it chose to share. An IDCW from a fund is your own money handed back with a tax bill stapled on. Same word. Opposite event.