Fixed Deposits (FD) are good
until you know Debt Funds (DF)

Calculate returns of DF and FD

Investment amount

Investment amount can't be less than 100000
1000
1000

Duration of investment

5years
  • 10
  • 9
  • 8
  • 7
  • 6
  • 5
  • 4
  • 3
  • 2
  • 1
10
10

Tax bracket A tax bracket refers to a range of incomes
subject to a certain income tax rate.

5%

20%

30%

A tax bracket refers to a range of incomes
subject to a certain income tax rate.

Understand performance better with an illustration

Smart saver

Pooja invested in Debt Funds

Pooja invested
in Debt Funds

Post Tax Returns 12,83,334 at 5.13%

Traditional investor

Rahul invested in Fixed Deposits

Rahul invested
in Fixed Deposits

Post Tax Returns 12,50,115 at 4.64%

Benefits of Debt Funds (DF) over Fixed Deposits (FD)

Particular Debt Funds (DF) Fixed Deposits (FD)
No Penalty for premature withdrawal
No TDS (Tax Deducted at Source)
Indexation benefit
Calculation summary
Invested amount (A) 10,00,000 10,00,000
Return (%) 5.4% * 6.25%**
Investment duration 5 years 5 years
Total returns (Invested amount + Returns) (B) 13,00,778 13,63,539
Indexed cost of acquisition (C) 12,16,912^ 10,00,000
Gross returns (B - A) 3,00,778 3,63,539
Taxable returns (B - C) 83,866 3,63,539
Net tax paid (Tax rate including cess and excluding surcharge) 17,444 1,13,424
Post tax returns (Invested amount + tax adjusted returns) 12,83,334 12,50,115
Post tax returns (%) View calculation summary 5.13% 4.64%
View calculation summary

^ Indexed cost of acquisition is calculated using cost of inflation index as notified by CBDT (Central Board of Direct Taxes).

** State Bank of India Fixed Deposit rate is considered for FD calculation.

* Average returns of short term category

Explore our Debt Funds

View all Debt funds

Where Debt Funds invest

State governments bonds

PSU bonds

Corporate bonds

Securities issued by Banks

Frequently Asked Questions

A debt fund is a mutual fund that puts money in fixed income instruments such as government and corporate bonds, treasury bills, commercial paper, certificates of deposit and so on. SEBI has categorised and rationalised debt funds into various categories like Liquid, Ultra-Short term, Short term, Medium duration, Long duration etc. Apart from active debt funds, there are target maturity funds as well which have specific date of maturity and are managed passively.

Choice of debt funds will depend on the underlying objective of investment. If an investor is considering debt fund for less than 1 year then debt funds like liquid, ultra short, low duration, money market may make more sense. If investment horizon is short-term (>1 years) then short-term & Banking & PSU category may be preferred. If investment horizon is long term (> 3years) then categories like medium duration, dynamic bond, long duration can be preferred.

If investor is seeking predictable returns over specific period then category Target Maturity funds, roll-down funds & FMP should be preferred.

Return of active debt funds can fluctuate based on movement in interest rates. Higher maturity of the portfolio can lead to higher fluctuation thereby impacting final returns.

Returns of Target maturity funds, roll-down funds & FMP also fluctuate but returns over the maturity of scheme/roll-down tend to be near to YTM of the portfolio at the time of investment.

Investor need to hold fund for atleast 3 years to get Long term capital gain taxation @ 20% with indexation benefit.

Unlike FDs, capital gain is chargeable to tax only when its realized. There is no TDS deduction on capital gain.

It means no hassle of TDS deduction, claiming TDS deducted annually in income tax returns, signing declaration for no TDS deduction etc.

Safety in debt funds will depend on the credit worthiness of underlying securities. Debt fund with high allocation to sovereign securities and high rated (AAA or A1+) instruments generally have low credit risk.

Further, debt funds have allocation to many fixed income securities thereby portfolio gets diversified unlike FDs which have full concentration risk on the bank.

NOTE:

Investment by Debt Funds are governed by SEBI (Mutual Funds) Regulations, 1996 and respective offer documents. Investments by Fixed Deposit are governed by applicable RBI norms.

  1. The Fixed deposit interest rate is based on historical State Bank of India Fixed deposit rates for different deposit terms.
  2. Interest rates on bank fixed deposits are subject to revision by the banks at their sole discretion from time to time.
  3. Tax laws are subject to amendments from time to time. The user/investor needs to verify all the facts and circumstances with the prevailing tax status and seek appropriate professional advice before acting on the basis of the above information.

Disclaimer:

In this tool DSP Investment Managers Private Limited (the AMC) has used information that is publicly available, including information developed in-house. While utmost care has been exercised while preparing this document, the AMC nor any person connected does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information.

The comparison with Fixed Deposit (traditional saving instruments) has been given for the purpose of the general information only. Investments in mutual funds should not be construed as a promise, guarantee on or a forecast of any minimum returns. Unlike traditional saving instruments there is no capital protection guarantee or assurance of any return in mutual fund investment. Traditional savings instruments are comparatively low risk products and are backed by the Government (except 5- year recurring deposits). Investment in mutual funds carries high risk as compared to the traditional saving instruments and any investment decision needs to be taken only after consulting the Tax Consultant or Financial Advisor.

All logos used in the image are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

For scheme specific risk factors, Asset Allocation details, load structure, investment objective and more details, please read the Scheme Information Document and Key Information Memorandum of the scheme available on ISC of AMC and also available on www.dspim.com.