SIP vs FD Calculator

Is SIP better than FD?

SIP in equity mutual funds outperforms FD over long periods (5+ years) in most scenarios — but the margin depends heavily on your tax bracket. FD interest is taxed every year at your income slab rate. SIP gains are taxed only when you sell, at a flat 12.5% LTCG rate on gains above ₹1.25 lakh. For someone in the 30% tax bracket, the FD's real post-tax return at 7% is only 4.9%. A SIP at 12% with 12.5% LTCG delivers 10.5%+ after tax. That's more than double.

For short-term goals under 3 years, FD is safer. SIP carries market risk and can show negative returns over 1–2 year periods.

How is FD interest taxed in India?

FD interest is added to your annual taxable income and taxed at your income tax slab rate. This creates a “tax drag” effect — your effective rate drops each year:

This tax drag compounds — it hits your returns every year, reducing the base that earns interest in the next year. TDS of 10% is deducted by banks if annual FD interest exceeds ₹40,000 (₹50,000 for senior citizens). Source: Income Tax Act, Section 194A.

How is SIP taxed in India?

SIP gains are taxed only when you redeem, using capital gains rules:

• LTCG (held over 12 months): 12.5% on gains above ₹1.25 lakh per year. Plus 4% cess.
• STCG (held under 12 months): 20%. Plus 4% cess.

The critical difference from FD: SIP compounding is uninterrupted during the investment period. No annual tax deduction reduces your growing corpus. The tax is paid once at the end. This “tax deferral” benefit means your money compounds on the full gross amount for years, before the government takes its cut.

AMFI data shows over 70% of equity mutual fund SIP investors remain invested beyond 1 year, qualifying for LTCG treatment.

When does SIP overtake FD?

Typically, 2–4 years for investors in higher tax brackets. Here's what the numbers show at ₹10,000/month, 12% SIP and 7.1% FD:

In the early years, FD's guaranteed compounding and no LTCG payable keeps it competitive. As years pass, SIP's higher return rate and tax deferral compound the advantage into a widening gap. Use the calculator above to see the exact year for your inputs.

SIP vs FD: full comparison table

Should you choose SIP or FD?

Choose SIP if:

• Your investment horizon is 5+ years
• You are in the 20% or 30% tax bracket (FD tax drag hits hardest)
• Your goal is wealth creation (retirement, house, education)
• You can tolerate short-term market fluctuations

Choose FD if:

• You need the money in under 3 years
• You are building an emergency fund
• You have zero risk appetite
• You are a senior citizen (extra FD rate benefit + ₹50K TDS threshold)

SEBI's investor education materials suggest most long-term financial goals are better served by equity mutual funds via SIP. For capital protection needs, guaranteed instruments like FDs, PPF, or Sovereign Gold Bonds serve better.

When to use a different calculator

• Already use FD only? See your FD returns: FD Calculator.
• Already use SIP? Project what it grows to: SIP Calculator.
• Want to target a specific corpus: Goal SIP Calculator.
• Comparing with PPF or other tax-free options: PPF Calculator.
• Planning monthly withdrawals in retirement: SWP Calculator.