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