What is the RD vs FD vs SIP Calculator?
The RD vs FD vs SIP Calculator is a free comparison tool that computes the after-tax maturity amount for all three popular Indian savings instruments side-by-side, using a single set of inputs. Enter your monthly investment amount, tenure, interest rates, expected SIP return, and income tax slab - and instantly see which instrument puts the most money in your hands at the end of the chosen period.
Unlike calculators that compare only pre-tax maturity, this tool applies realistic tax treatment: income slab rate on RD and FD interest, and the 12.5% LTCG rate (with the ₹1.25L annual exemption) on equity SIP gains - giving you the true take-home comparison that matters for net wealth building.
RD vs FD vs SIP - The Definitive Guide for Indian Investors (2026)
Every salaried Indian with monthly savings faces the same question: where should this money go? The three most popular options - Recurring Deposits, Fixed Deposits, and Systematic Investment Plans in mutual funds - represent a spectrum from guaranteed-and-safe to market-linked-and-potentially-superior. Understanding their structural differences, tax implications, and real-world long-term outcomes is the foundation of smarter personal finance.
The short answer most advisors agree on: for goals under 3 years, RD or FD are appropriate. For goals beyond 5 years, equity SIP almost always delivers significantly higher real (inflation-adjusted) wealth - but only if you stay invested through inevitable market downturns. The long answer is considerably more nuanced.
What is a Recurring Deposit (RD)?
A Recurring Deposit (RD) is a term deposit product offered by banks and post offices where you commit to depositing a fixed sum every month for a predetermined tenure. At maturity, you receive the accumulated principal plus compounded interest. Unlike a savings account where unspent money can drift, an RD creates a binding monthly commitment - making it an instrument of forced savings discipline.
Interest on RDs is compounded quarterly - a standard set by the Reserve Bank of India for all bank RDs. Post Office RDs compound quarterly at 6.7% (FY25), providing a government-backed alternative to bank RDs. The key distinction from FDs: RDs accept periodic deposits rather than a single lumpsum, making them accessible to those building savings incrementally from monthly income.
₹5,000/month for 36 months at 7% (quarterly compounding): the first instalment earns interest for 35 months, the second for 34 months, and so on - the last instalment earns almost zero. This is why RD returns are mathematically lower than FD returns at the same rate even with the same total principal. At 7% for 3 years: ₹5,000/month RD = ~₹2,00,200 (gain: ₹20,200) vs the same ₹1.8L in FD for 3 years = ~₹2,23,700 (gain: ₹43,700). The FD earns significantly more because the full lumpsum compounds from day one.
What is a Fixed Deposit (FD)?
A Fixed Deposit (FD) is a single lumpsum investment at a predetermined interest rate for a fixed tenure. India's most popular financial product - over ₹200 lakh crore is held in bank FDs as of 2024. FDs offer complete capital protection (DICGC insurance up to ₹5 lakh per bank), returns known before you invest, and flexible tenure from 7 days to 10 years.
FDs require a lumpsum at the start - the entire amount earns interest from Day 1, making FDs more efficient than RDs at the same rate for equal total capital. The limitation: you need the savings already accumulated.
FD interest is taxable at your income tax slab rate every year - even if you don't withdraw it. At 30% tax, a 7% FD has an effective return of 7% × 0.70 = 4.9% - barely above India's 5–6% long-run inflation. This is the fundamental reason FDs are unsuitable as a long-term wealth creation instrument for higher-income earners.
Real return on a 7% FD across tax brackets and inflation scenarios:
| FD rate | Tax bracket | Post-tax return | Inflation | Real return | ₹1L after 10 yrs (real) |
|---|---|---|---|---|---|
| 7% | 0% | 7.00% | 5% | +1.90% | ₹1.21 L |
| 7% | 5% | 6.65% | 5% | +1.57% | ₹1.17 L |
| 7% | 20% | 5.60% | 5% | +0.57% | ₹1.06 L |
| 7% | 30% | 4.90% | 5% | -0.10% | ₹99,052 |
| 7% | 30% | 4.90% | 6% | -1.04% | ₹90,094 |
What is SIP in Mutual Funds?
A Systematic Investment Plan (SIP) is a method of investing in mutual funds - typically equity mutual funds - in fixed periodic amounts. Each month, a fixed sum automatically purchases units of a chosen mutual fund scheme at the prevailing Net Asset Value (NAV). Over time, this builds a large, diversified equity portfolio from small monthly contributions.
SIP harnesses two powerful mechanisms: rupee cost averaging (you automatically buy more units when prices fall and fewer when they rise, lowering your average cost) and compounding at equity rates (the Nifty 50 has delivered 12–14% CAGR over any 10-year rolling period in the past 25 years).
When markets fall 30%, your SIP automatically buys more units at lower prices. When markets recover, those additional units amplify your gains. A lumpsum investor who invested at a market peak must wait for a full recovery to break even. The SIP investor who continued through the correction has a lower average cost and profits faster on recovery. This is why SIP is structurally superior for volatile assets - you stop needing to time the market correctly.
Tax treatment - the critical difference most people overlook
Tax treatment is arguably the most important differentiator - especially for investors in the 20% and 30% brackets. The after-tax returns can differ dramatically from headline interest/return rates.
| Tax aspect | RD | FD | Equity SIP |
|---|---|---|---|
| Tax on gains | At income slab (5/20/30%) | At income slab (5/20/30%) | 12.5% LTCG (above ₹1.25L/yr) |
| When taxed | Each year as interest accrues | Each year as interest accrues | Only when you redeem / sell |
| Exemption | None | None | ₹1.25L of gains exempt per year |
| TDS threshold | ₹40,000/yr per bank | ₹40,000/yr per bank | None (no TDS on equity MF) |
| Tax efficiency | Poor for 30% bracket | Poor for 30% bracket | Excellent - flat 12.5% vs slab |
| Tax harvesting possible | No | No | Yes - redeem ₹1.25L gains yearly |
| Effective return at 30% + 12% / 7% FD | 4.9% post-tax | 4.9% post-tax | ~10.5–11% post-tax CAGR (est.) |
Which should you choose? A practical decision framework
The right instrument is always contextual - it depends on your time horizon, tax bracket, risk tolerance, and whether the goal has a fixed deadline. Use this framework:
For goals under 12 months, equity SIP is inappropriate - markets can fall 30–40% in a year and you can't wait for recovery. Use FD if you have a lumpsum, or a liquid/ultra-short debt fund for the highest returns with same-day redemption. Capital safety and predictability take priority over returns maximisation.
For 1–3 year goals (home down payment, wedding fund, emergency corpus), FD/RD's guaranteed returns are appropriate. Some investors use a hybrid: 70% FD/RD for guaranteed corpus + 30% debt mutual fund SIP for marginally higher return. Pure equity SIP carries too much timing risk for sub-3-year fixed deadlines.
In this middle ground, a hybrid mutual fund SIP (equity + debt in a single fund) captures some equity upside while limiting downside volatility. Historically, 3-year rolling returns for diversified equity funds are positive in about 85% of cases - not certain enough for critical fixed deadlines but reasonable for flexible goals.
For retirement (20–30 years), children's education (10–15 years), or any long-term goal, equity SIP has historically been superior in every measurable way. At 12% SIP vs 7% FD for 20 years: ₹5,000/month → ₹49.95L in SIP vs ₹26.5L in FD - nearly double. The Nifty 50 has never given negative 10-year returns in its entire history.
An emergency fund must be immediately accessible without penalty or market risk. FDs can be broken with a small penalty, savings accounts are instant, and liquid debt MFs offer same-day redemption. RDs cannot be partially withdrawn. SIP in equity can be down 30% exactly when emergencies strike. Never put your emergency fund in equity SIP or RD.
The numbers: RD vs FD vs SIP across time horizons
All figures below: ₹10,000/month. RD and FD at 7% p.a. SIP at 12% p.a. After-tax figures assume 30% income slab for RD/FD interest and 12.5% LTCG above ₹1.25L annual exemption for SIP.
| Tenure | Total invested | RD (after tax) | FD (after tax) | SIP (after tax) | SIP vs best FD/RD |
|---|---|---|---|---|---|
| 1 yr | ₹1.20 L | ₹1.23 L | ₹1.26 L | ₹1.28 L | SIP +₹2,057 |
| 2 yr | ₹2.40 L | ₹2.53 L | ₹2.65 L | ₹2.72 L | SIP +₹7,420 |
| 3 yr | ₹3.60 L | ₹3.89 L | ₹4.18 L | ₹4.35 L | SIP +₹16,753 |
| 5 yr | ₹6.00 L | ₹6.84 L | ₹7.74 L | ₹8.12 L | SIP +₹38,174 |
| 7 yr | ₹8.40 L | ₹10.12 L | ₹12.08 L | ₹12.75 L | SIP +₹67,698 |
| 10 yr | ₹12.00 L | ₹15.79 L | ₹20.41 L | ₹21.99 L | SIP +₹1.57 L |
| 15 yr | ₹18.00 L | ₹27.72 L | ₹41.08 L | ₹46.56 L | SIP +₹5.48 L |
| 20 yr | ₹24.00 L | ₹43.88 L | ₹74.51 L | ₹90.58 L | SIP +₹16.07 L |
The optimal strategy: use all three, for different purposes
The sophisticated approach is not to pick one instrument for all savings - it's to use each for the specific purpose it's best suited for, within a coherent financial plan.
Keep 3–6 months of expenses in FD. Use for goals 1–3 years away with fixed deadlines. Instantly breakable unlike RD. Senior citizens get +0.5% higher rates.
Use RD when you want forced savings discipline for a specific short-term goal - car down payment, vacation, wedding contribution. The fixed monthly commitment prevents ad hoc spending.
Retirement corpus, children's education, marriage fund - all should be equity SIP. The compounding and tax efficiency over 10–30 years is irreplaceable by any guaranteed instrument.