SIP vs FD: what ₹10,000 a month actually becomes

This is the most-asked question in Indian personal finance, and it is usually answered badly — by quoting one number and ignoring what kind of number it is.

The arithmetic

₹10,000 a month for 15 years. Both routes receive exactly ₹18,00,000.

	Recurring deposit	SIP
Rate	7% contractual	12% assumed
Maturity value	₹31,76,893	₹50,45,760
XIRR	7.18%	12.67%
After 30% tax	₹27,63,825	see below

On the face of it the SIP wins by ₹18,68,867, and by ₹22,81,935 once the deposit's interest is taxed at a 30% slab.

But those two numbers are not the same kind of number

The RD's 7% is a contractual obligation. The bank has agreed to it; barring the bank failing, you will receive ₹31,76,893.

The SIP's 12% is an assumption you supplied. Nobody has promised it. It is what the arithmetic produces if markets happen to average 12% across your particular fifteen years — which they may not.

Change only that assumption and watch the argument collapse:

Actual return	SIP maturity value
12%	₹50,45,760
8%	₹34,83,451
7%	₹31,88,112
6%	₹29,22,728

At 7%, the SIP delivers ₹31,88,112 against the RD's ₹31,76,893 — a difference of about ₹11,000 on ₹18 lakh invested. Essentially identical, except one of them came with fifteen years of market risk and the other did not.

The honest way to state the comparison is this: the SIP is not offering you more money. It is offering you a distribution of outcomes whose middle is higher and whose bottom is lower.

The tax point cuts the other way

Deposit interest is taxed at your slab rate every year. In the 30% bracket a 7% deposit is really 4.90% post-tax — and we will come back to what that means against inflation in another guide.

Equity mutual funds are taxed only on redemption, and long-term capital gains above the annual exemption are taxed at a lower rate than slab income. That is a genuine structural advantage of the SIP, and it is separate from the return assumption.

What actually decides it

Not the maturity figures. These:

When do you need the money? If the answer is inside five years, market risk is not a theoretical concern — you can be down 20% on the date you need it, and no amount of long-run averaging helps you. Short horizons favour the guaranteed instrument almost regardless of the numbers above.

Can you tolerate the fall? Not "would you accept lower returns" — can you watch a balance drop by a third and keep contributing? Most people believe they can and then sell at the bottom, converting a paper loss into a real one. The behaviour matters more than the product.

What is the money for? A house deposit in three years and a retirement in thirty are not the same problem. Emergency money should not be in either — it should be liquid.

What else do you hold? This is rarely a binary. Many people hold both, deliberately: the deposit for the near-term and known needs, the SIP for the long-dated ones.

Run it on your own numbers

Both calculators take the same inputs, and the comparison tool will put them side by side with risk, lock-in and tax treatment shown as columns rather than footnotes — so you can see what the bigger number costs in certainty.

Try changing the assumed return to 7% before you decide. It is the single most clarifying thing you can do with these tools.

General information about how these products work, not financial advice or a recommendation of either. We are not an investment adviser or distributor. For a decision of any size, speak to a SEBI-registered adviser.