FD vs SIP 2025: Which Is Better for Your Money?
A practical, data‑driven guide to help you decide between Fixed Deposits (FDs) and Systematic Investment Plans (SIPs). Understand returns, risk, taxation, liquidity, and goal‑based use cases—then use the calculator above to model your own plan.
Quick Summary
When FDs Win
- Short horizons (≤3 years)
- Capital protection is paramount
- Emergency/parking of surplus cash
When SIPs Win
- Long horizons (≥5–7 years)
- Wealth creation, beating inflation
- Disciplined investing through volatility
Balanced Approach
- Use FDs for 6–12 months expenses
- Use SIPs for long‑term goals
- Rebalance annually
Return Potential vs Risk
FDs offer fixed, contractually guaranteed rates (bank and tenure dependent). SIPs invest in mutual funds, where returns are market‑linked and can fluctuate in the short run but typically outperform fixed income over long horizons.
| Aspect | FD | SIP (Equity‑oriented) |
|---|---|---|
| Typical Annual Return | 5–7.5% (bank dependent) | 10–14% (long‑term average) |
| Volatility | Low | Medium to High (short term) |
| Inflation Beating | Often No | Yes, long term |
Taxation Overview
- FD: Interest taxed at slab rates every year; TDS may apply.
- SIP (Equity‑oriented): LTCG above ₹1 lakh taxed at 10% after 1 year; STCG at 15% if redeemed within 1 year.
- Debt‑oriented funds: Post‑2023 taxation at slab rates; consider goals and risk.
Tax rules can change; consult a tax professional for personalized advice.
Goal‑Based Recommendations
Short‑Term (≤3 years)
- Emergency fund, vacations, appliance purchase
- Prefer FDs or liquid/ultra‑short debt funds
Medium‑Term (3–7 years)
- Down payments, education milestones
- Balanced advantage / hybrid funds + some FD safety
Long‑Term (7+ years)
- Retirement, wealth creation, children's higher education
- Equity SIPs with periodic rebalancing
Common Mistakes to Avoid
- Comparing short‑term equity SIP results against FD returns
- Ignoring inflation while planning long‑term goals
- Not laddering FDs for liquidity or not stepping up SIPs with income
- Chasing highest FD rate without checking bank safety and premature withdrawal penalties
How to Use This Page
- Enter your amounts, tenure, and return assumptions above
- Click Calculate to see invested vs maturity values
- Use goal‑based guidance to pick the right mix
- Revisit and tweak as rates and income change
There is no universal winner—pair FDs for safety and liquidity with equity SIPs for growth. The right blend depends on goal horizon, risk comfort, and cash‑flow needs.