FD vs Debt Mutual Fund Calculator
Same tax rate now, but one of them defers it
FD vs Debt Mutual Fund Comparator
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Years
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FD post-tax maturity
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interest taxed at slab, typically each year
Debt fund post-tax maturity
0
taxed at slab too, but only on redemption
Debt fund's deferred-tax edge
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In today's money (inflation-adjusted)
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real purchasing power after assumed inflation
Since April 2023, both are taxed at slab -- the rate parity is real
Debt mutual funds lost their long-term capital-gains indexation benefit for investments made on or after 1 April 2023 — gains are now taxed at your slab rate, same as FD interest, closing a gap that used to clearly favor debt funds.
What debt funds still keep: tax deferral
FD interest is typically taxed every year as it accrues (even if you don't withdraw it), while a debt fund's gain is only taxed when you actually redeem — letting the untaxed portion keep compounding until redemption, a real if smaller edge than the old indexation benefit.
FD still wins on TDS-free predictability and safety
FDs carry DICGC insurance up to ₹5 lakh per bank and a guaranteed rate; debt funds carry credit and interest-rate risk depending on their underlying holdings — the tax picture is close, but the risk profile isn't identical.
FD interest is modeled as taxed annually at your slab rate as it accrues (the common real-world treatment for cumulative FDs reported each year). Debt fund gains are modeled as taxed once, at slab rate, only at redemption at the end of the tenure — the deferred-tax compounding advantage this creates is the main thing this comparison isolates, now that the tax RATE itself is identical since the April 2023 rule change. TDS on FD interest above the annual threshold isn't separately itemized here. Not tax or investment advice.