Safe and steady, or market-linked growth? Put the same monthly amount in an FD/RD and a SIP and compare what you actually keep after tax.
FD vs SIP — which grows more?
| FD / RD | SIP |
|---|
FD modelled as a recurring deposit compounded quarterly, interest taxed at your slab (approx.). SIP gains taxed as equity LTCG at 12.5% above ₹1.25 lakh. SIP returns are market-linked and not guaranteed.
FD vs SIP at a glance
- Returns: FDs give fixed returns (6–7.5%); equity SIPs have historically delivered more over long periods, but with ups and downs
- Risk: bank FDs are insured up to ₹5 lakh per bank by DICGC; SIP values can fall in the short term
- Tax: FD interest is taxed every year at your slab; equity SIP gains are taxed at 12.5% only above ₹1.25 lakh a year, and only when you sell
- Liquidity: both can be withdrawn early — FDs with a penalty, SIPs subject to exit load
Frequently asked questions
Is SIP always better than FD?
Not always. For goals under 3 years or money you can’t afford to see fall, an FD is safer. For goals 7+ years away, equity SIPs have historically beaten FDs after tax.
Why does tax matter so much?
If you are in the 30% slab, FD interest loses almost a third to tax, while equity gains enjoy a ₹1.25 lakh yearly exemption and a lower 12.5% rate.
Can I do both?
Yes — many people keep an emergency fund and short-term goals in FDs and invest long-term money through SIPs.