SIP vs FD in 2026: The Post-Tax Math Most People Ignore
Bank FDs feel safe, but slab taxation plus inflation silently erodes them. We run the exact 10-year post-tax numbers against an equity SIP.
SIP & Mutual Funds · 9 min read
The debate is older than most investors' portfolios: are bank FDs the safe choice, or does an equity SIP quietly beat them over a decade? The answer depends almost entirely on tax and inflation — two things the headline FD rate hides.
The setup
Compare ₹10 lakh invested for 10 years: (A) a bank FD at 7% p.a., quarterly compounding, interest taxed at your slab; (B) an equity mutual fund lumpsum (or equivalent SIP) at an assumed 11% p.a., with LTCG at 12.5% on gains above ₹1 lakh.
| FD (7%, taxed at 31.2%) | Equity (11%, LTCG 12.5%) | |
|---|---|---|
| Maturity pre-tax | ₹20.0 lakh | ₹28.4 lakh |
| Tax paid | ₹3.1 lakh | ₹2.2 lakh |
| Post-tax value | ₹16.9 lakh | ₹26.2 lakh |
| Post-tax effective return | ~5.4% p.a. | ~10.1% p.a. |
At 6% inflation, the FD's post-tax real return is roughly −0.6% — you are slowly losing purchasing power. The equity option keeps you comfortably ahead, but with real volatility: a 30% drawdown mid-way is normal and must be survivable.
When the FD wins
- You are in the 0% or 5% slab (seniors with 80TTB benefit do especially well).
- You need the money within 3 years — equity can be down in any given 3-year window.
- You cannot stomach a 20–30% temporary loss without selling at the bottom.
A sensible middle path
Most people should hold both: an emergency fund and 2–3 years of goals in FD/short-term debt, and long-term (5+ year) goals in equity via SIP. Use our SIP calculator and FD calculator to run your own numbers.