Prepared by Finin2min Editorial Desk · Rates and rules verified 5 October 2026
A fixed deposit and a debt mutual fund are now taxed the same way for most investors — at your slab rate. See the post-tax value of each, the fund return you need to beat the FD, and what changes if the fund is a hybrid or equity-oriented fund.
FD: interest compounds quarterly, and the tax on the interest is paid every year at your slab rate plus cess, so the net rate compounds. Debt fund: the fund grows at the return you enter, and tax is paid once, when you redeem. Because deferral is valuable, a debt fund can beat an FD by a small margin even at the same pre-tax return — but a fund’s return is not guaranteed and a bank FD (up to ₹5 lakh per bank under DICGC) is.
The break-even return is the pre-tax fund return at which your post-tax value equals the FD’s.
| Investment | Tax on gain / interest |
|---|---|
| Bank / post-office FD interest | Slab rate every year; TDS 10% above ₹50,000 interest (₹1 lakh for senior citizens) per payer |
| Debt mutual fund (65%+ in debt and money market) bought on/after 1 April 2023 | Slab rate, irrespective of holding period (section 50AA) |
| Hybrid fund with 35%-65% equity | Short-term (24 months or less): slab; long-term: 12.5% without indexation |
| Equity-oriented fund (65%+ equity) | Short-term (12 months or less): 20%; long-term: 12.5% above ₹1.25 lakh a year |
Units of a debt fund bought before 1 April 2023 follow the earlier long-term rules (12.5% after 24 months). Check your fund’s category and purchase date.
₹5,00,000 for 3 years at the 30% slab (31.2% with cess). FD at 7.5%: after tax you hold ₹5,83,903. A debt fund returning 7.5% grows to ₹6,21,148; tax at slab is ₹37,798, leaving ₹5,83,350 — -₹553 more than the FD thanks to tax deferral. If the fund were a hybrid fund held 3 years the 12.5% long-term rate would apply and leave ₹6,05,399.
For most investors the tax rate is now the same (slab rate), so the benefit is only deferral: you pay tax when you redeem rather than every year. Risk and liquidity differ.
Gains on specified mutual funds bought on or after 1 April 2023 are taxed at your slab rate regardless of how long you hold the units. There is no indexation.
₹50,000 a year per bank for most individuals and ₹1,00,000 for senior citizens, at 10%. TDS is not the final tax; you pay the balance at your slab rate.
No. NAVs move with interest rates and credit events. An FD pays the contracted rate, and deposits up to ₹5 lakh per bank are insured.
Choose the fund type in the calculator; the 24-month (hybrid) or 12-month (equity) long-term rules and 12.5% rate are applied.
Rates and rules shown here were checked against the sources above on 5 October 2026. Government notifications can change a rate or rule at short notice; always confirm on the official site before you invest, file or claim.
Educational estimate only. Tax, legal, financial or regulatory treatment depends on facts and the law applicable to the relevant period. Verify the current official source or obtain professional advice before acting.
Scope: Post-tax comparison of a bank fixed deposit and a mutual fund for Tax Year 2026-27.
The calculation engine was checked against an independently written reference implementation across 540 FD-vs-fund input combinations, and against published figures where the scheme publishes them. Review date: 5 October 2026.
Prepared by Finin2min Editorial Desk. Educational estimate only.
Background, worked examples and the rules behind these numbers.