FD vs SIP — Frequently Asked Questions
Is SIP always better than FD?+
Not always. SIP in equity mutual funds has historically outperformed FD over 7+ year horizons, but carries market risk. Over short periods (1-3 years), FD may deliver more predictable returns. FD is better for: capital preservation, short-term goals, retirees. SIP is better for: long-term wealth creation (10+ years), beating inflation, tax efficiency via LTCG.
How is FD interest taxed vs SIP returns?+
FD interest is taxed every year at your income tax slab rate (5%, 20%, or 30%) plus cess. Equity SIP held 12+ months: LTCG above ₹1.25L taxed at 12.5%. Equity SIP held under 12 months: STCG at 20%. Debt fund SIP: taxed at slab rate. So equity SIP has a significant tax advantage for long-term investors in the 20-30% slabs.
What return should I expect from equity SIP?+
Historical CAGR for equity mutual funds over long periods: Large-cap: 11-13%, Mid-cap: 14-17%, Small-cap: 16-20%. Nifty 50 average CAGR (1995-2024): ~14%. Our calculator default is 12% which is a conservative estimate for large-cap or flexi-cap funds. Past performance doesn't guarantee future returns.