Live post-tax corpus calculator: FD interest taxed at your slab vs ELSS LTCG at 12.5%. See the true after-tax difference at any horizon.
| Factor | FD | ELSS |
|---|---|---|
| Investment | Fixed Deposit (Recurring/FD SIP) | ELSS Mutual Fund SIP |
| Return Type | Guaranteed (govt/bank rate) | Market-linked (variable) |
| Typical Return | 6.5–9.5% p.a. (pre-tax) | 12–15% CAGR (historical avg) |
| Tax on Returns | Slab rate (5–30%) on ALL interest | LTCG 12.5% only ABOVE ₹1.25L/yr |
| TDS | 10% TDS if interest >₹40,000/yr | None on SIP/MF redemptions |
| Lock-in | Varies (RD: none, Tax FD: 5yr) | 3 years per SIP installment |
| 80C Benefit | Only 5-yr Tax Saver FD | Yes — all ELSS qualifies |
| Capital Safety | Guaranteed (DICGC insured to ₹5L) | Market risk — no guarantee |
| CIBIL / Collateral | Loan against FD at low rate | Can pledge after lock-in |
| Best For | Safety, short-term, senior citizens | Wealth creation, tax saving, 5+ yr |
Fixed deposits and ELSS mutual funds are both popular savings/investment vehicles in India, but they are taxed very differently. FD interest is taxed at your full income slab rate every year — so a 30% taxpayer earning 7.2% on FD effectively earns only ~5% post-tax. ELSS gains are taxed at a flat 12.5% LTCG rate, and only on gains exceeding ₹1.25 lakh per year. This tax asymmetry creates a massive long-term difference.
For investors with a 5+ year horizon and 20–30% tax slab, ELSS is almost always better post-tax. For senior citizens, very short-term goals (under 3 years), or those in the 5% slab, FD remains competitive. The breakeven: ELSS needs to return just ~6% CAGR post-tax to beat a 7.2% FD for a 30% slab investor.
Yes. FD interest accrues on an annual basis and is taxable in the year it accrues — even if you do not withdraw. Banks also deduct 10% TDS if total interest across all FDs in a bank exceeds ₹40,000 per year (₹50,000 for senior citizens). This yearly tax drag significantly erodes FD returns for high-income earners.
Long-Term Capital Gains (LTCG) on equity mutual funds including ELSS is taxed at 12.5% on gains exceeding ₹1.25 lakh per financial year. Gains up to ₹1.25L per year are completely exempt. This means for most retail investors with moderate SIPs, ELSS returns are largely tax-free in practice.
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