FD vs SIP
Bank fixed deposit against equity mutual fund SIP. Same total money committed, same horizon, post-tax outcome on both sides. Updated for FY26 LTCG rules.
How to read the comparator
The FD column treats the monthly amount as a recurring deposit at the chosen pre-tax rate with quarterly compounding (the Indian-bank standard). The SIP column applies the equity SIP future-value formula. Both sides land the same total rupees over the same horizon. The "post-tax corpus" is what you keep after tax: FD interest at slab, SIP at 12.5% LTCG above ₹1.25 lakh exemption (single-FY redemption).
The single-FY redemption assumption is conservative for SIP. In practice, redeeming the corpus across several financial years uses fresh ₹1.25 lakh exemption each year and lowers the tax bite further. FD interest doesn't get that kind of optimisation; it accrues at slab in every year of the deposit.
When FD genuinely wins
Horizons under 5 years, money earmarked for a specific non-negotiable goal (down-payment, child's admission fee), or a temperament that can't sit through a 25% drawdown. The cost of equity returning -20% in the year you need to redeem is real and not modelled here. If the money has a fixed-date job, fixed-return instruments are usually the right answer regardless of the post-tax math.
Both have a cousin worth knowing
For details on either side in isolation, the FD calculator handles compounding-frequency switches and the SIP calculator handles step-up, lumpsum top-ups, and the year-by-year corpus growth.
Frequently Asked Questions
Is FD really safer than an equity SIP? +
On a 1-3 year horizon, yes, decisively. Scheduled commercial bank FDs carry DICGC insurance up to ₹5 lakh per depositor per bank, and the rate is locked at booking. Equity mutual funds can drop 20-30% in a bad year. On a 10+ year horizon the picture flips: equity historically delivers 4-6% per year more than FD, and the longer you hold the lower the chance of equity underperforming FD in absolute rupees. The right answer depends entirely on when you need the money.
Why is the FD slab tax so punishing? +
FD interest is taxed at your slab rate as 'income from other sources'. Someone in the 31.2% slab earning 7% nominal FD interest takes home about 4.8% post-tax. Banks deduct 10% TDS under Section 194A if combined interest from one bank crosses ₹40,000/year (₹50,000 for senior citizens). The slab-rate treatment is why a 7% FD often loses to a 12% equity SIP on a post-tax basis even after the SIP's 12.5% LTCG hit, simply because the LTCG rate is capped.
Should I keep my emergency fund in FD or SIP? +
Emergency fund means money you need within 6-12 months. Equity SIPs are wrong for that horizon — a 20% drawdown right before you need the money is a real risk. Use FD or a liquid mutual fund for the emergency fund, run the SIP for goals 5+ years out. Don't mix the buckets.
What about senior citizens — does the comparator change? +
Senior citizens (60+) typically get 0.25-0.50% extra on bank FDs, and Section 80TTB exempts the first ₹50,000 of interest per year. That narrows the post-tax gap, especially for retirees in the lower slabs. Equity SIPs still tend to win on long horizons, but for someone in retirement drawing down rather than accumulating, capital protection often matters more than expected return.