RD vs FD vs SIP Calculator
Compare guaranteed bank deposits against equity market compounding. Evaluate maturity corpus, quarterly interest vs CAGR, and long-term wealth creation across Recurring Deposits, Fixed Deposits, and Mutual Fund SIPs.
Comparison Parameters
Wealth Comparison
Year-by-Year Wealth Progression
| Year | Outlay Paid | RD Balance | FD Balance | SIP Balance | SIP Advantage vs RD |
|---|
RD vs. FD vs. SIP: Comparing the Three Wealth Pillars
When planning a savings strategy, retail investors typically debate three core investment avenues: Recurring Deposits (RD), Fixed Deposits (FD), and Systematic Investment Plans (SIP) in Equity Mutual Funds. While FDs and RDs provide guaranteed capital preservation, Equity SIPs harness commercial economic growth to beat inflation over multi-year horizons.
• Fixed Deposit (IBA Quarterly): MFD = Ptotal × (1 + R / 4)4 × (t / 12)
• Recurring Deposit (Quarterly Staggered): MRD = ∑ [ Pmonthly × (1 + R / 4)4 × (n – i + 1) / 12 ]
• Mutual Fund SIP (Annualized CAGR): MSIP = Pmonthly × [((1 + i)n – 1) / i] × (1 + i)
Why an Equity SIP Outperforms Bank Deposits Over 7+ Years
In a 10-year investment of 10,000 monthly (total outlay of 12 Lakhs), a bank RD at 7.0% accumulates to approximately 17.4 Lakhs. Over the same period, an Equity SIP generating a historical 13.0% CAGR reaches approximately 24.3 Lakhs.
- Rupee-Cost Averaging: SIPs acquire more fund units during market corrections and fewer units at market peaks, lowering average purchase cost.
- Compounding Efficiency: Equity mutual fund gains compound untaxed until redemption, whereas bank deposit interest is taxed annually at slab rates.
- Inflation Hedging: Consumer price inflation erodes real purchasing power by 6%–7% annually. Fixed deposits often produce flat or negative real post-tax returns, whereas equities offer long-term real wealth growth.
Comprehensive Head-to-Head Comparison: RD vs. FD vs. SIP
| Dimension | Recurring Deposit (RD) | Fixed Deposit (FD) | Mutual Fund SIP |
|---|---|---|---|
| Capital Outlay | Regular monthly installments. | Single upfront lump sum. | Regular monthly installments. |
| Capital Risk | Zero risk (Sovereign/DICGC insured up to 5 Lakhs). | Zero risk (Sovereign/DICGC insured up to 5 Lakhs). | Market-linked NAV fluctuation. |
| Expected Returns | 6.5% – 7.5% guaranteed. | 6.5% – 7.5% guaranteed. | 12.0% – 14.0% historical long-term CAGR. |
| Taxation Mechanism | Taxed annually at marginal slab rate (TDS applies). | Taxed annually at marginal slab rate (TDS applies). | Taxed only on redemption (LTCG: 12.5% above 1.25L). |
| Ideal Time Horizon | Short-term (6 months to 3 years). | Short to medium-term (1 to 5 years). | Long-term wealth goals (5 to 15+ years). |
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Frequently Asked Questions
A Fixed Deposit (FD) is a lump-sum, guaranteed bank deposit that compounds from Day 1. A Recurring Deposit (RD) is a guaranteed bank deposit funded in monthly installments. A Systematic Investment Plan (SIP) is a disciplined monthly investment into market-linked mutual funds that aims for higher long-term compounding returns without capital guarantees.
Equity SIPs invest in productive corporate enterprises whose earnings typically outpace inflation, historically delivering 12% to 14% annualized returns over 10+ years compared to 6.5% to 7.5% for fixed bank deposits. Furthermore, equity mutual fund capital gains are taxed only upon redemption, allowing pre-tax compounding to work uninterrupted.
Bank FDs and RDs are mathematically and logically superior for short-term financial goals (less than 3 years) and emergency funds where capital preservation is mandatory. Equity SIPs experience market drawdowns and should only be chosen for time horizons of 5 to 7 years or longer.
Interest from FDs and RDs is taxed annually at your marginal income tax slab rate (up to 30% plus cess). Equity mutual fund returns are taxed as capital gains: Short-Term Capital Gains (STCG) at 20%, and Long-Term Capital Gains (LTCG) at 12.5% on profits exceeding 1.25 Lakh per financial year.
Banking & Financial Engineering Standards
Calculations follow the Indian Banks’ Association (IBA) quarterly compounding framework for bank deposits and SEBI standardized CAGR compounding formulas for mutual fund SIPs.
Disclaimer: This calculation tool is provided for educational and self-directed personal finance planning purposes only. Mutual fund investments are subject to market risks, and past performance does not guarantee future results. Fixed deposit terms depend on individual bank policies. Consult a licensed financial advisor before allocating capital.