FD is taxed at your income slab rate every year. SIP (equity MF) is taxed at just 12.5% LTCG — and only when you redeem. This after-tax difference compounds dramatically over time. See the real numbers.
📚 Understand This Calculator
SIP vs FD: the real comparison after tax might change your mind
Most people compare SIP and FD by headline numbers: "My FD gives 7.5%" vs "My SIP gave 12%." But this comparison ignores how they're taxed — and the tax difference is enormous over the long term. FD interest is taxed every year, which kills compounding. SIP gains are only taxed when you sell. This calculator shows you the fair, after-tax comparison.
🇮🇳 Real-Life Example
Priya invests ₹10,000/month in FD at 7.5%. Suresh invests ₹10,000/month in equity SIP at 12%. Both for 15 years. Both in the 30% income tax bracket.
📌 Priya's FD after 15 years: Each year's interest is taxed at 30% as it's earned — this annual tax drag kills compounding. Final in-hand: ~₹20.1 lakh
📌 Suresh's SIP after 15 years: No tax during 15 years. At redemption, LTCG at 12.5% (with ₹1.25 lakh exemption). Final in-hand: ~₹41.6 lakh
Difference: ₹21.5 lakh in Suresh's favour — even after paying more absolute tax overall.
The FD's "safety" cost Priya ₹21.5 lakh. Suresh took equity risk but was rewarded with 2× more real wealth.
💡 The Key Insight
FD's hidden flaw: annual taxation on interest. Every year you pay tax, that taxed amount stops compounding forever. Over 15 years, this "tax drag" compounds to a massive number. SIP lets the entire corpus grow untouched for years, then pays tax once at the end — often at a lower effective rate due to the ₹1.25L LTCG exemption.
⚠️ Common Mistake
Treating all FD interest as "guaranteed income." FD interest is added to your total income and taxed at your slab rate — 30% if you're in the highest bracket. A 7.5% FD for a person in 30% slab gives a post-tax return of just 5.25%. That's below inflation. You're losing money in real terms while feeling "safe."
📊 SIP vs FD Comparison
📈 SIP (Equity Mutual Fund)
12.5% after ₹1.25L exemption (Budget 2024)
₹1,25,000 per financial year
🏦 Fixed Deposit
Current SBI 5Y FD: ~7.0%
FD interest taxed at your slab rate each year
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Metric
📈 SIP (MF)
🏦 FD
Total Invested
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Gross Corpus
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Tax Paid
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Net Corpus (After Tax)
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Effective Annual Return
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Key Tax Differences
Factor
Equity SIP (MF)
Fixed Deposit
When taxed
Only on redemption
Every year (accrual basis)
Tax rate
12.5% LTCG (flat)
At income slab (up to 30%)
Annual exemption
₹1.25L LTCG exempt/year
₹40K TDS threshold only
Compounding on tax
Full corpus compounds till redemption
Tax reduces compounding base each year
Inflation beating
Yes — equity outpaces inflation long-term
Marginal — real FD return often near 0%
Frequently Asked Questions
When is FD better than SIP? ▾
FD wins when: (1) Your horizon is under 3 years — equity markets can be volatile and SIPs need time to average out. (2) You cannot afford to see temporary losses — FD principal is guaranteed. (3) You are in the 5% or 0% tax slab — the tax advantage of MFs diminishes significantly. (4) Your goal is capital preservation, not wealth creation. For anything over 5 years with a growth goal, equity SIP typically outperforms significantly after tax.
How does this calculator model SIP tax? ▾
This calculator applies LTCG tax (12.5%) on total gains at the end of the period, minus the ₹1.25 lakh annual exemption. In practice, gains from each SIP instalment would be taxed based on when each instalment was redeemed and held for 12+ months. This calculator provides a good approximation — for precise LTCG tax calculation on SIP redemptions, use our dedicated LTCG Calculator.
BullWiser's MF Analyser helps you pick the right Direct-plan equity fund for your SIP — low TER, strong track record, and better post-tax returns than FD.