SIP vs FD Calculator

Historically, equity mutual fund SIPs have delivered 12-15% CAGR over 10+ years, while FDs offer 6-7.5% pre-tax returns. After adjusting for inflation (5-6%) and taxes, FD real returns are often near zero or negative. SIPs benefit from rupee cost averaging and compounding in equity markets, making them significantly better for long-term wealth creation (7+ years). However, FDs provide guaranteed returns and capital safety for short-term goals.

FDs are better when: (1) Your investment horizon is less than 3 years — equity SIPs can give negative returns in short periods. (2) You need guaranteed, predictable returns — FDs have zero market risk. (3) You are in the lowest tax bracket — FD interest is taxed at your slab rate, so low-income investors pay less tax. (4) You need an emergency fund — FDs can be broken with a small penalty, while redeeming SIPs during a market crash locks in losses. (5) Senior citizens get 0.5% extra FD rate plus ₹50,000 TDS exemption under Section 80TTB.

FD interest is added to your income and taxed at your slab rate (up to 30% + cess). TDS of 10% is deducted if interest exceeds ₹40,000/year (₹50,000 for senior citizens). For equity SIPs: LTCG above ₹1.25 lakh/year is taxed at 12.5% (holding period > 1 year). STCG (holding < 1 year) is taxed at 20%. For debt fund SIPs: gains are taxed at your income slab rate regardless of holding period (post-2023 rules). Tax-saving ELSS SIPs also qualify for Section 80C deduction up to ₹1.5 lakh.

SIP risks include: (1) Market risk — equity values fluctuate; you can see negative returns for 1-3 year periods. (2) No guaranteed returns — unlike FDs, SIP returns depend on market performance. (3) Emotional risk — investors often panic-sell during corrections, locking in losses. (4) Fund manager risk — poor fund selection can underperform even FDs. FD risks include: (1) Inflation risk — 6% FD post-tax return minus 5-6% inflation = near-zero real return. (2) Reinvestment risk — when FD matures, new rates may be lower. (3) Bank default risk — deposits above ₹5 lakh per bank are not insured by DICGC.

Yes, and most financial advisors recommend it. A common allocation strategy: keep 6 months of expenses in FDs or liquid funds as an emergency fund, use SIPs for long-term goals (5+ years) like retirement or children's education, and use short-term FDs for goals within 1-3 years like a vacation or down payment. The 50-30-20 approach works well: 50% in equity SIPs for growth, 30% in debt funds or FDs for stability, and 20% in tax-saving instruments (ELSS SIP or tax-saving FD).