Difference between Fixed Deposit and Mutual Fund Nowadays many of us invest in mutual funds for tax savings and for long-term savings,...
Difference between Fixed Deposit and Mutual Fund
Basis
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Fixed Deposit
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Mutual Fund
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Investment for
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Fixed deposit investment for Capital Protection
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Mutual Fund Investment for growing your Money
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Returns
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Fixed deposit generates fixed returns based on the type of FD and holding Period.
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In Mutual Funds no fixed return, return are based on market fluctuations, and based on the type of mutual fund [ Read More].
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Inflation
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fixed deposits are not inflation protective rather then they give fixed returns which may below the inflation rate.
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A mutual funds can beat inflation in long time investments and give more returns.
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Risk
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As in above said Fixed deposits give a fixed returns so they have zero risk.
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Mutual fund risk purely depends on the type of mutual fund invested if invested in equity linked then will be riskier as compared to MF that invested in govt. bond and securities.
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Tax Benefit
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Fixed deposits can give tax benefits but with lock-in period if you invested for a long time in FD then tax benefits will be available. for short time investment in FD doesn’t give any tax Benefit.
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Investment in a TAX saving Mutual fund will give Tax Benefits. All mutual Funds are not TAX Saving Mutual funds. For clarification on this, you need to talk to your tax adviser.
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Taxability
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Interest earned on Fixed Deposit is taxable as per Income Tax Slab Rates.
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Based on the Period of holding the mutual fund Long term Capital Gain (LTCG) of 10% or Short Term Capital Gain (STCG) of 15% will be taxable. As of Now Equity funds are also Taxable as per Holding Period.
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Fund Type
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Holding Period for Long Term
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Short Term
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Equity Fund
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1 year
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15%
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Aggressive Hybrid Equity Fund
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1 year
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15%
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Debt Fund
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3 years
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Slab rate
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International Funds
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3 years
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Slab rate
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Other Hybrid Funds - If more than 65% of assets in equity, same as equity funds. Otherwise same as debt funds.
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