Your money
₹
years
Change the rates
% a year
% a year
% a year
% a year
% a year
Your 7% FD earns, after tax
0%
Side by side
The same amount, for the same time, in your tax slab.
Why the tax differs
- Fixed depositInterest is added to your income and taxed at your slab every year, even on a cumulative deposit that pays nothing until maturity. The bank deducts TDS once interest crosses ₹50,000 a year, or ₹1 lakh for senior citizens.
- Debt fundGains are taxed at your slab too, but only when you sell. Until then the whole amount keeps compounding, which is why the same rate leaves you a little more. You can also choose which year to take the gain in.
- Corporate bondInterest is taxed at your slab each year, like a deposit. The higher rate is payment for the risk that the company pays late or not at all.
- Arbitrage fundTaxed like an equity fund: 12.5% on gains above ₹1.25 lakh a year once held for 12 months, and 20% before that. Returns vary from month to month and are not fixed.
The return is only half the question
- SafetyBank deposits are insured up to ₹5 lakh per bank by DICGC. Debt funds and bonds carry no such cover, and their safety depends on what they hold.
- AccessA deposit can be broken with a penalty. Most debt and arbitrage funds pay out in one to three working days. A bond may be hard to sell before it matures.
- CertaintyOnly the deposit and a bond held to maturity tell you the return up front. Fund returns move with interest rates.
- PurposeEmergency money belongs where it is safe and reachable. The comparison above matters most for money you will not touch for a few years.