FD vs RD vs SIP: How They Differ and What the Numbers Show

Put ₹5,000 a month into a bank RD at 7% for five years and you will have ₹3,59,664 on a date you know in advance. Put the same ₹5,000 a month into an equity fund SIP and, depending on how markets behave, you might end with about ₹2.6 lakh or about ₹4.1 lakh, or something outside that range. Nobody can tell you which today. Most of the FD vs RD vs SIP question comes down to that difference between a known figure and a range of possible ones.

An FD takes a lump sum you already have. An RD and a SIP both take a fixed amount every month, which is why they get compared most often. The figures below come from our FD, RD and SIP calculators.

Side by side

₹5,000 a month for 5 years, run through each

That is ₹3,00,000 in all. The RD uses 7%, a typical bank rate for this tenure, and 6.7%, the Post Office rate for October to December 2026. The SIP is shown at several steady yearly returns, because the real one is unknown in advance.

Over five years the gap between a steady 7% RD and an 8% SIP is about ₹7,400. For that, the SIP holder accepts a range that runs from a loss of about ₹36,000 to a gain of about ₹1.06 lakh in these examples, and real markets can land outside it.

Now suppose you had the whole ₹3,00,000 on the first day. A 5-year FD at 7%, compounded quarterly, grows to about ₹4,24,433. FDs don't pay a better rate than RDs; the FD simply has all the money working for all five years, while the RD's money arrives in instalments and is invested for about half the period on average.

Over 10 years the picture shifts

₹5,000 a month for 10 years is ₹6,00,000 invested.

At 12%, the SIP gains about ₹5.2 lakh against the RD's ₹2.7 lakh or so. That depends entirely on the fund averaging 12% for a decade. At 4% the SIP finishes behind the RD. Longer periods have historically evened out some of equity's ups and downs, but there is no rule that says they must.

Short periods are where a SIP can hurt

₹5,000 a month for 2 years in an RD at 7% gives about ₹1,29,099. In a SIP, the same two years give about ₹1,35,325 if the fund grows 12% a year, and about ₹1,07,726 if it falls 10% a year. The second figure is below the ₹1,20,000 you put in, with no time left to wait for a recovery. For a wedding, a fee payment or a down payment due on a fixed date soon, that downside usually matters more than the extra ₹6,200 or so of upside.

The timing of a bad year matters too. On a 10-year SIP, a fall in the last year does far more damage than the same fall in the first, because by then most of your money is in the fund. The SIP calculator page works through an example.

Getting your money out early

Breaking an FD usually means the bank pays the rate for the period actually completed, minus a penalty. Five-year tax-saver FDs can't be broken at all. An RD works the same way, and missed instalments add fees. A SIP can be stopped any day and units sold on any working day, apart from ELSS funds, which hold each instalment for three years, and exit loads that some funds charge on units sold within a set period. The SIP's catch is price rather than access: you may have to sell when the value is down.

How each is taxed

FD and RD interest is added to your income every year and taxed at your slab rate, even in a cumulative deposit that pays nothing until maturity. As of November 2026, a bank deducts TDS when your interest from it crosses ₹50,000 in a financial year (₹1,00,000 for a senior citizen), under section 393 of the Income-tax Act, 2025.

A SIP is taxed only when you sell, and only on the gain. For equity-oriented funds, as of November 2026, units held for more than 12 months pay 12.5% on long-term gains above ₹1.25 lakh in a financial year, and units held for 12 months or less pay 20%. Each instalment has its own holding period. Debt funds follow different rules. In the higher slabs, this difference in tax can matter as much as the difference in returns.

Inflation affects all three

A fixed return protects you from market falls but not from rising prices. If prices rise 5% a year, the ₹3,59,664 from the 5-year RD buys roughly what ₹2,81,806 buys now. The ₹59,664 of interest looks smaller once you allow for that, and smaller again after tax on it. The inflation calculator runs this for any amount, and the compound interest calculator shows how much time adds to any fixed rate.

Questions that narrow the choice

1. When exactly will you need this money? If it is a fixed date within two or three years, a product whose value can't fall before then is the usual match.
2. Is it a lump sum or a monthly surplus? A lump sum points to an FD; a monthly surplus to an RD or a SIP.
3. If this money were down a quarter next year, would you sell? If yes, a market-linked product may not suit it.
4. What is your tax slab? Higher slabs make the yearly tax on FD and RD interest bite harder.

Plenty of households use more than one: an FD as an emergency fund, an RD for next year's school fees, and a SIP for retirement twenty years away.

This guide explains how the products work and shows calculated examples. The SIP figures assume steady returns that real markets don't deliver. Mutual fund investments are subject to market risks. For advice on your own situation, speak to a SEBI-registered investment adviser.