Dividend Reinvestment Calculator

Investment

Every dividend you reinvest buys more of the holding, which then earns its own dividends and price growth. See how that compounding edge stacks up against simply taking the cash.

Free · No sign-up · Private6 min readUpdated 27 July 2026

In short: Dividend reinvestment (DRIP) uses each dividend to buy more of the same holding, so future dividends and price growth apply to a larger base — compounding to a bigger corpus than taking dividends as cash over the same period.

Your inputs

Results

Value with reinvestment

₹42,09,104

Dividends reinvested (DRIP)

Value without reinvestment

₹30,71,822

Capital + cash dividends

Extra from reinvesting

₹11,37,281

The DRIP advantage

Effective CAGR with DRIP

11.24%

On the initial investment

Reinvesting vs taking cash

How reinvested dividends compound above the cash-dividend path over time.

Year-wise value

Year-wise value
Year	Reinvested (DRIP)	Cash dividends
1	₹5,56,200	₹5,56,200
2	₹6,18,717	₹6,16,896
3	₹6,88,261	₹6,82,448
4	₹7,65,621	₹7,53,243
5	₹8,51,677	₹8,29,703
6	₹9,47,405	₹9,12,279
7	₹10,53,894	₹10,01,462
8	₹11,72,352	₹10,97,778
9	₹13,04,124	₹12,01,801
10	₹14,50,707	₹13,14,145

Reinvested path grows the whole balance; cash path grows capital only and adds dividends aside.

Formula

Value = Initial × [(1 + price growth) × (1 + dividend yield)]ⁿ

Initial: Amount invested today
price growth: Annual share-price growth rate
dividend yield: Annual dividend as a % of value, reinvested each year
n: Number of years held

Step-by-step calculation

Worked with the default values.

1
Combined annual growth (DRIP)
(1 + 8%) × (1 + 3%) − 1
= 11.24%
2
Value with reinvestment
₹5,00,000 × [(1 + price) × (1 + yield)]^20
= ₹42,09,104
3
Capital only (price growth)
₹5,00,000 × (1 + 8%)^20
= ₹23,30,479
4
Cash dividends collected
Sum of each year’s dividend on the growing capital
= ₹7,41,344
5
Extra from reinvesting
Value with reinvestment − (capital + cash dividends)
= ₹11,37,281

How it works

Each year the holding first grows by the price-growth rate, then the year’s dividend (yield × grown value) is reinvested, buying more units on the same date.
Those reinvested units grow and pay dividends in every later year, so the base that compounds keeps widening — dividends earning dividends.
The cash path grows the original capital by price alone and simply piles up each year’s dividend as idle cash, which never compounds.

Examples

₹5,00,000 at 8% price growth and 3% yield, held 20 years, reinvested

Reinvesting compounds at roughly 11.2% a year to about ₹42 lakh, comfortably ahead of the cash-dividend path.

Same holding but dividends taken as cash

Capital grows on price alone to about ₹23 lakh, plus a pile of collected cash dividends — a materially smaller total than reinvesting.

Understanding the Dividend Reinvestment Calculator

What dividend reinvestment does

When a stock or fund pays a dividend, you can either take the cash or use it to buy more of the same holding. A dividend reinvestment plan (DRIP) does the latter automatically. The difference sounds small — the same dividend, just spent differently — but over long horizons it reshapes your final wealth, because reinvested dividends buy units that then earn their own dividends and price growth. Your compounding base keeps widening.

Reinvesting vs taking cash

This calculator projects two paths for the same holding. In the reinvesting path, each year the value grows by the price-growth rate and then that year's dividend is used to buy more units, so the whole balance compounds at roughly the combination of price growth and yield. In the cash path, the original capital grows on price alone, and each year's dividend simply accumulates as idle cash that never compounds.

Take ₹5,00,000 at 8% price growth and a 3% yield over 20 years. Reinvesting compounds at about 11.2% a year to roughly ₹42 lakh. Taking the cash grows the capital to about ₹23 lakh on price alone, plus a pile of collected dividends — a clearly smaller total, and the gap widens with every extra year held.

The tax reality in India

There is a catch worth stressing: reinvested dividends are still taxable. Since FY 2020-21, dividends are taxed in your hands at your income-tax slab rate in the year you receive them, whether you pocket the cash or plough it back. A 10% TDS also applies once your dividends from a company or fund cross ₹5,000 in a year. So reinvesting is powerful for compounding, but it does not defer the dividend tax — and you may owe tax without receiving cash to pay it.

Making it work for you

For long-term wealth building, many Indian investors sidestep the payout entirely by choosing the growth option of an equity fund, where income is retained in the NAV and effectively reinvested with no manual step and no dividend-tax drag along the way. If you hold individual stocks, reinvest dividend cash promptly and watch concentration risk, since always buying more of one holding can quietly overweight your portfolio. And once you shift from building wealth to living off it, taking dividends as cash is exactly the point.

Pros

Compounds automatically — reinvested dividends buy units that earn their own dividends and growth.
Removes the temptation to spend small dividend payouts instead of investing them.
Puts money to work immediately rather than letting cash sit idle and lose value to inflation.
Over long horizons the reinvested portion can become a large share of your final corpus.
Growth-option funds do it for you seamlessly, with no manual reinvestment needed.

Cons

Dividends are taxed at your slab rate in the year received even when reinvested, so tax is due without cash in hand.
You give up current income, which is unsuitable if you rely on dividends to spend.
Reinvesting concentrates more money into the same holding, increasing single-stock or single-fund risk.

Tips

1For pure long-term growth, prefer the growth (not IDCW) option of a fund so income compounds inside the NAV.
2If you hold individual stocks, reinvest dividend cash promptly rather than letting it idle in your account.
3Keep aside enough to cover the slab-rate tax on dividends, since reinvesting leaves you no cash to pay it.
4Review concentration risk — reinvesting always into one holding can overweight your portfolio over time.
5Switch to taking dividends as cash once you reach the stage of living off your portfolio.

Frequently asked questions

Everything you need to know about the Dividend Reinvestment Calculator.

What is a dividend reinvestment plan (DRIP)?

A DRIP automatically uses the dividends a holding pays to buy more of that same holding instead of paying you cash. Over time this compounds your position, because the newly bought units also earn dividends and price growth.

Why does reinvesting beat taking cash?

Reinvested dividends buy more units that themselves grow and pay dividends, so your compounding base keeps expanding. Cash dividends, by contrast, sit idle and only grow your wealth if you separately invest them elsewhere.

Are reinvested dividends still taxable in India?

Yes. Since FY 2020-21 dividends are taxed in your hands at your income-tax slab rate in the year you receive them, whether you take them as cash or reinvest. Reinvestment does not defer or reduce the dividend tax.

Is TDS deducted even if I reinvest?

Yes. A company or fund deducts 10% TDS once your dividends from it exceed ₹5,000 in a financial year, regardless of whether you reinvest. You adjust this against your final tax liability, or file Form 15G/15H if your income is below the taxable limit.

How is the effective CAGR calculated?

It is the constant annual rate that turns your initial investment into the final reinvested value. With reinvestment the effective rate is close to combining price growth and yield — for example 8% growth and 3% yield compound to roughly 11.2% a year.

Does a growth mutual fund do this automatically?

Effectively, yes. In an equity fund’s growth option, income is retained and reflected in the NAV rather than paid out, which behaves like automatic reinvestment. A dividend/IDCW option pays out instead and does not compound the same way.

Can I reinvest dividends on individual stocks in India?

There is no formal broker-run DRIP like in some markets, but you can achieve the same effect by manually buying more shares with the dividend cash. Many investors instead prefer growth-option funds, which reinvest for you seamlessly.

Does reinvesting help more over long or short periods?

The advantage grows with time. Over a year or two the gap is small, but over decades the compounding of reinvested dividends can add a very large amount, because the extra units keep multiplying.

What assumptions does this calculator make?

It assumes constant annual price growth and a constant dividend yield, with dividends reinvested once a year at the year-end value and no transaction costs or dividend taxes deducted from the reinvested amount. Real outcomes vary with markets and taxes.

Should I always reinvest dividends?

Reinvesting maximises long-term growth, but if you need the income to live on, taking cash is the point of a dividend portfolio. The choice depends on whether you are still building wealth or drawing it down.

Methodology & sources

How the Dividend Reinvestment Calculator is calculated, and where the underlying rules come from.

How we calculate it

Every result is produced by a single, shared and tested financial-formula library used across the whole site — so the maths is consistent from one calculator to the next. Figures are estimates based on the inputs you enter and standard assumptions (such as regular compounding and constant rates); real-world outcomes vary with taxes, fees and changing rates. All calculations run in your browser — nothing you type is stored or sent to a server.

Sources & references

Editorial policy & disclaimer. FinCalcHub provides free educational tools and estimates — not personalised financial, tax or investment advice. Verify important decisions with a qualified professional. Read our editorial approach, disclaimer and privacy policy.

Last reviewed for accuracy on 27 July 2026.

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