SIP vs FD: Which Is Better?
The same Rs 10,000 a month, run through both, over 10 and 20 years.
For goals more than 7 years away, an equity SIP has historically beaten an FD by a wide margin — Rs 10,000/month for 20 years grows to about Rs 99 lakh at 12% versus about Rs 52 lakh in a 7% FD. For goals under 3 years, the FD wins, because equity can be down 30% exactly when you need the money. The deciding factor is not return, it is time horizon: SIPs need time to survive their own volatility.
Last updated 17 July 2026 IST · Maintained by SnoopTool, a free online tools website with 165+ browser-based utilities.| Period | Total invested | SIP value (12%) | FD value (7%) | SIP advantage |
|---|---|---|---|---|
| 5 years | Rs 6.0 lakh | Rs 8.2 lakh | Rs 7.2 lakh | Rs 1.0 lakh |
| 10 years | Rs 12.0 lakh | Rs 23.2 lakh | Rs 17.4 lakh | Rs 5.8 lakh |
| 15 years | Rs 18.0 lakh | Rs 50.5 lakh | Rs 31.7 lakh | Rs 18.8 lakh |
| 20 years | Rs 24.0 lakh | Rs 99.9 lakh | Rs 52.4 lakh | Rs 47.5 lakh |
The gap is small early and enormous late
Look at the table's last column. At 5 years the SIP is ahead by Rs 1 lakh — a margin that a single bad market year could erase. At 20 years it's ahead by Rs 47.5 lakh, roughly double the entire amount invested.
That's compounding doing its work, and it's why the SIP-vs-FD argument is really a horizon argument. Over 5 years the SIP's edge is not worth the risk of a drawdown. Over 20 years, choosing the FD costs you more than you put in.
Tax makes the gap wider than it looks
The table is pre-tax, and tax treatment favours the SIP considerably.
- FD interest is added to your income and taxed at your slab, every year, whether or not you withdraw. In the 30% bracket a 7% FD nets about 4.9%.
- Equity SIP gains are only taxed when you sell, and then at 12.5% LTCG with the first Rs 1.25 lakh per year exempt. Deferring tax for 20 years is itself a large advantage, because the untaxed amount keeps compounding.
When the FD is genuinely the right answer
Don't over-read the table. Put money in an FD when:
- You need it within 3 years — a house down payment, a wedding, school fees. Certainty beats expected return.
- It's your emergency fund. This money's job is to be there, not to grow.
- You will panic-sell. An investor who exits equity at the bottom does worse than an FD holder. Know yourself.
Run your own figures in the SIP calculator and the FD calculator.
Tools used in this guide
Frequently asked questions
Is SIP better than FD?
For horizons over 7 years, yes — historically by a large margin. Rs 10,000/month for 20 years reaches about Rs 99 lakh in an equity SIP at 12% versus about Rs 52 lakh in a 7% FD, and the SIP's tax treatment is better too. For horizons under 3 years the FD is better, because equity markets can fall 30% in a year and you have no time to recover.
Can I lose money in a SIP?
Yes. SIPs invest in market-linked mutual funds with no guaranteed return, and over short periods your value can fall below what you invested. Historically, Indian equity SIPs held for 10+ years have very rarely ended negative, but 'rarely' is not 'never'. An FD, by contrast, has an assured return and DICGC deposit insurance up to Rs 5 lakh per bank per depositor.
How is FD interest taxed?
FD interest is added to your total income and taxed at your slab rate, on an accrual basis each year — you owe tax even if you haven't withdrawn. Banks deduct 10% TDS once interest crosses Rs 40,000 a year (Rs 50,000 for senior citizens); if your slab is higher, you pay the balance at filing. This is why a 7% FD nets only about 4.9% for someone in the 30% bracket.
Should I stop my SIP when the market falls?
Falling markets are when a SIP does its best work — the same instalment buys more units at lower prices, which lowers your average cost. Stopping during a fall converts a temporary paper loss into a permanent one and forfeits the recovery. If a market fall makes you want to stop, that's usually a sign the money had too short a horizon for equity and belonged in an FD.
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