FD vs RD vs SIP: Which Investment is Best for You?

The Three Most Popular Indian Investment Options

Fixed Deposit (FD)

Returns: 6.5–7.5% p.a. (2024-25, varies by bank and tenure)

Risk: Near zero — DICGC insured up to ₹5 lakhs

Tax: Interest fully taxable as per your income slab; TDS applies above ₹40,000/year

Liquidity: Premature withdrawal allowed with penalty (typically 0.5–1%)

Recurring Deposit (RD)

Returns: Similar to FD rates for equivalent tenure

Risk: Near zero (same DICGC protection)

Tax: Same as FD — interest taxable

Liquidity: Monthly fixed commitment; premature withdrawal allowed

SIP (Equity Mutual Fund)

Returns: 10–14% CAGR historically over 10+ years (market-linked, no guarantee)

Risk: Market risk — short-term losses possible; long-term risk significantly lower

Tax: Gains up to ₹1.25 lakh LTCG exempt; 12.5% LTCG above that after 1 year

Liquidity: High — redeem anytime (except ELSS, 3-year lock-in)

Quick Comparison Table

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Recommendation

Emergency fund / short-term goals (< 3 years): FD or RD

Medium-term goals (3–7 years): Mix of RD and balanced SIP

Long-term wealth creation (7+ years): SIP in diversified equity funds

Calculate your own returns using FD Calculator, RD Calculator, and SIP Calculator.