SIP vs FD: which is actually better for your money?

Published rates read from the issuer's own pages on 29 September 2026. Every figure in the table is computed, not quoted. We make a money-tracking app; we do not sell either product on this page and we are not financial advisers.

The numbers

A fixed deposit cannot take Rs 10,000 a month — that is a recurring deposit, which is the honest monthly comparison. The Post Office five-year RD rate is used because it is published and locks at opening. The smaller figure under a projected column is the same sum at 8% — what a poor decade can look like. Neither figure is a promise. Computed on 29 September 2026; rounded to the rupee.

The rates used, and what they are worth

• equity mutual fund: 12% (an assumption, not a rate anyone offers) — An assumption used to project, not a rate. Equity funds can and do fall; a projection is not a promise and past returns do not carry forward.
• Post Office 5-year RD: 6.7% — Locks at opening for the five-year term.

When the SIP is the better choice

• The money is for something more than seven to ten years away — retirement, a child aged two, a house you are in no hurry to buy.
• You can leave it alone through a fall. The projection only holds if you keep paying in when the value drops.
• You want the instalment to be flexible: a SIP can be paused, reduced or stepped up; an RD instalment is fixed for the term.
• Equity held over a year is taxed as long-term capital gains, with the first Rs 1.25 lakh of gains in a year exempt. RD and FD interest is added to your income and taxed at your slab rate, every year, whether or not you withdraw it.

When the deposit is the better choice

• The money has a date on it inside five years — a fee, a wedding, a deposit. A fall in year four is not something you can wait out.
• You want the number to be certain. The RD rate locks at opening and the maturity value is known on day one.
• It is your emergency fund. An emergency fund that can be worth 30% less in the month you need it is not an emergency fund.
• You will lose sleep. A plan you abandon in a crash is worse than a smaller plan you keep.

Questions

Can I put Rs 10,000 a month into an FD?

Not into one FD. A fixed deposit takes a single deposit for a fixed term; the monthly-instalment version is a recurring deposit. Some people instead open a fresh FD each month, which works but leaves you managing dozens of maturity dates. Comparisons that show "SIP vs FD" on a monthly figure are almost always comparing a SIP against an RD.

Is a SIP guaranteed to beat an FD?

No. A deposit rate is a promise from the bank; a SIP return is an assumption about a market. Over long periods Indian equity has returned more than deposits, but there is no rule that says the next ten years must. The table shows the same SIP at a poor-decade return so you can see the downside, not just the brochure figure.

Which is taxed less?

Usually the SIP, and the difference is larger than people expect. FD and RD interest is added to your income and taxed at your slab every year it accrues, even if you do not touch it. Equity held over a year is taxed as long-term capital gains with the first Rs 1.25 lakh of gains each year exempt, and only when you sell. Check the current rates before you file.

What if I need the money early?

An FD or RD can be broken, usually with a penalty of around 0.5% to 1% off the rate. A SIP has no lock-in unless it is an ELSS fund, but you sell at whatever the market is on that day, which may be less than you put in.

Should I do both?

Most people should. The common split is an emergency fund and any goal inside five years in deposits, and long-horizon money in equity. The question is rarely which one is better in the abstract — it is which one fits the date the money is needed.

Run it on your own numbers

SIP calculator · RD calculator · FD calculator

Other decisions

SIP vs lumpsum · PPF vs ELSS · Flat vs reducing interest rate · All comparisons

Sources

1. https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=181