FD vs SIP: the real long-term gap
Fixed deposits offer guaranteed, taxable, lower returns; equity SIPs carry risk but have historically built far more wealth over long horizons.
Fixed deposits and equity SIPs sit at opposite ends of the risk-return spectrum. Choosing between them is really about time horizon and certainty.
How they differ
| Fixed / Recurring Deposit | Equity SIP | |
|---|---|---|
| Return | Guaranteed, ~6–7.5% | Market-linked, historically ~11–13% |
| Risk | Very low | Moderate to high |
| Taxation | Interest taxed at your slab | LTCG at 12.5% above ₹1.25L/yr |
| Best for | Short-term, capital safety | Long-term wealth |
Why the gap widens over time
A few percentage points of extra return, compounded for 15–20 years, becomes an enormous difference. On the same monthly contribution, an equity SIP can finish with two to three times the corpus of a recurring deposit. The SIP vs FD calculator lets you see this — including a post-tax view.
The tax angle
FD interest is fully taxable as "income from other sources" at your marginal slab, and banks deduct TDS. Equity gains are taxed more gently: long-term gains are exempt up to ₹1.25 lakh a year, then taxed at 12.5%. After tax, the FD's effective return shrinks further.
When an FD still makes sense
- Money you'll need within 1–3 years.
- An emergency fund that must not fall in value.
- Goals where certainty matters more than growth.
The sensible split
Most investors use both: FDs (and other debt) for safety and short-term needs, equity SIPs for long-term growth. Decide the split by goal and horizon, not by chasing the highest number.
Compare for yourself
Try the SIP vs FD calculator with your own amount and tax slab, and see SIP vs PPF for a tax-free debt comparison.
Bottom line: For long-term goals, an equity SIP has historically left fixed deposits far behind — but the FD's guarantee is the right tool for money you can't afford to risk.