FinCalc

FD vs Mutual Fund

Compare post-tax returns of FD and mutual funds

₹
%
%
Yrs

Your Tax Bracket

Fixed Deposit

₹8,50,559

Maturity: ₹10,00,799

Interest: ₹5,00,799

Tax (30%): -₹1,50,240

Mutual Fund (Equity)

₹14,36,934

Maturity: ₹15,52,924

Gains: ₹10,52,924

LTCG Tax (12.5%): -₹1,15,991

Mutual Fund wins by ₹5,86,375 after tax.

Post-Tax Value Over Time

Note: FD interest is taxed at your income tax slab rate. Equity MF gains held >1 year are taxed at 12.5% LTCG with ₹1.25L annual exemption. Actual tax may vary based on surcharge, cess, and indexation benefits.

What is a FD vs Mutual Fund?

Fixed deposits and mutual funds are the two most common investment choices for Indian investors, but comparing them isn't straightforward because they're taxed very differently. FD interest is taxed at your income tax slab rate (up to 30%), while equity mutual fund gains enjoy lower capital gains rates. This makes the post-tax comparison critical.

This calculator shows you the actual money you take home from each option after taxes, so you can make an informed decision based on your tax bracket, investment horizon, and risk appetite. The results often surprise people — a mutual fund earning 12% can net you significantly more than an FD at 7% even after accounting for the higher risk.

When to Use This Calculator

  • Deciding between an FD and a balanced mutual fund for a 5-year goal
  • Seeing the tax advantage of equity mutual funds over FDs in your tax bracket
  • Comparing post-tax returns for retirement corpus allocation
  • Convincing a risk-averse family member to consider mutual funds with real numbers
  • Planning allocation between safe (FD) and growth (MF) investments

Key Terms

TDS

Tax Deducted at Source — banks deduct 10% TDS on FD interest exceeding ₹40,000/year (₹50,000 for senior citizens). You still owe the full tax at your slab rate when filing returns.

LTCG

Long-Term Capital Gains — for equity MFs, gains above ₹1.25L on units held >1 year are taxed at 12.5%. For debt MFs, gains are taxed at slab rate regardless of holding period.

STCG

Short-Term Capital Gains — for equity MFs, gains on units held <1 year are taxed at 20%. For debt MFs, gains are always at slab rate.

Indexation

A method of adjusting the purchase price of an asset for inflation, reducing taxable capital gains. Was available for debt MFs bought before April 2023, no longer available for new investments.

Frequently Asked Questions

Are FDs really safe compared to mutual funds?+
FDs are safe up to ₹5 lakh per bank (DICGC insurance) and offer guaranteed returns. Mutual funds carry market risk — equity MFs can lose 20-30% in a bad year. However, over 10+ years, equity MFs have consistently beaten FDs by a wide margin. The 'safety' of FDs also means your money may not beat inflation after tax.
How are FD returns taxed?+
FD interest is added to your income and taxed at your slab rate. If you're in the 30% bracket, you keep only ₹5.04 of every ₹7.20 interest earned on a 7.2% FD — an effective return of just 5.04%. Senior citizens get a ₹50,000 deduction under Section 80TTB.
Which is better for a 3-year goal?+
For goals under 5 years, FDs or debt mutual funds are generally safer. Equity mutual funds are volatile in the short term and may give negative returns over 3 years. For goals beyond 7 years, equity mutual funds have historically outperformed significantly.
What about new tax rules for debt mutual funds?+
Since April 2023, debt mutual fund gains are taxed at your income slab rate regardless of holding period — eliminating the earlier indexation benefit for long-term holdings. This makes debt MFs less tax-efficient compared to before, though they still offer better liquidity and potentially higher returns than FDs.