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Investments

FD vs SIP Comparator

Compare Fixed Deposit and SIP returns side by side. See which gives better inflation-adjusted wealth over your investment horizon.

7%
12%
10 Years
6%
💡 FD interest is fully taxable at your income tax slab rate. SIP gains (equity) held 1+ year are taxed at 10% LTCG above ₹1L. This calculator accounts for tax on FD returns.
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FD vs SIP — Understanding the Real Difference

This is India's most debated personal finance question. Fixed Deposits feel safe. SIPs feel risky. But over long periods, the numbers tell a very clear story — and it's not always what you expect. Here's a complete breakdown of both options.

Fixed Deposits — Safety with a Hidden Cost

Bank Fixed Deposits in India offer interest rates between 6.5–7.5% per year (as of 2024). They are backed by DICGC insurance up to ₹5 lakh, making them one of the safest instruments available. However, FD interest is fully taxable at your income tax slab rate — so if you're in the 20% slab, your effective post-tax FD return is only around 5.5–6%. With India's average inflation running at 5–6% per year, the real (inflation-adjusted) return on an FD is often near zero or even negative. Your money grows in number but not in purchasing power.

Mutual Fund SIP — Higher Return, Higher Volatility

Equity mutual fund SIPs have historically delivered 11–14% annual returns over 10+ year periods (Nifty 50 index funds averaged ~12%). Long-term capital gains (held 1+ year) are taxed at only 10% above ₹1 lakh per year — significantly lower than FD tax for most investors. However, SIP returns are not guaranteed — equity markets fluctuate, and short-term returns can be negative. The risk reduces substantially with longer investment horizons of 7+ years.

The Inflation-Adjusted Verdict

When you account for taxes and inflation, the actual wealth creation difference between FD and SIP becomes dramatic over time. On a 15-year horizon with ₹10,000 monthly: an FD at 7% (post-tax 5.5%) gives a real corpus of roughly ₹15–16L in today's purchasing power, while a SIP at 12% with 10% LTCG tax gives a real corpus of ₹30–35L. The compounding advantage of higher pre-tax returns — even after paying more tax — is decisive over long periods. Use the calculator above to see the exact numbers for your specific inputs.

Frequently Asked Questions

Is SIP always better than FD?
Not always. SIP in equity funds is better for long-term goals (7+ years). FD is better for short-term goals (under 3 years), emergency funds, or for those who cannot tolerate any loss in principal. A balanced approach — FD for near-term needs and SIP for long-term wealth — is often the best strategy. Never invest in equity SIP money you might need within 3 years.
How is FD interest taxed in India?
FD interest is added to your total income and taxed at your applicable income tax slab rate — 5%, 20%, or 30%. Banks deduct TDS at 10% if annual interest exceeds ₹40,000 (₹50,000 for senior citizens). If you're in the 30% slab, you pay an additional 20% tax over the TDS deducted. This significantly erodes FD effective returns for high-income earners.
How is SIP/mutual fund return taxed?
For equity mutual funds: gains from units held for more than 1 year are Long Term Capital Gains (LTCG) taxed at 10% above ₹1 lakh per year. Gains from units held under 1 year are Short Term Capital Gains (STCG) taxed at 15%. For debt funds (post-April 2023): gains are added to income and taxed at slab rate, removing the earlier indexation benefit.
Can I do both FD and SIP simultaneously?
Absolutely yes — and this is what most financial planners recommend. A common approach: keep 3–6 months of expenses in FD as emergency fund, invest in SIP for long-term goals (retirement, child's education), and use a liquid fund or short-term debt fund as a parking option between these extremes. Diversification across instruments reduces overall risk.

Related Calculators

⚠️ Disclaimer: SIP returns shown are based on your input rate and are not guaranteed. Mutual fund investments are subject to market risk. Past performance does not guarantee future results. FD rates may change. Tax calculations are estimates.
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