How the SIP vs RD calculator works
Enter the monthly amount, the number of years, the RD rate your bank is currently offering, and the return you want to assume for the SIP. The RD side compounds quarterly, which is how banks and the post office actually calculate recurring deposits; each instalment earns interest only for the months it stays on deposit. The SIP side compounds monthly at the assumed annual rate, with each instalment treated as invested at the start of its month.
The chart shows both balances at the end of each year, so you can see where the curves separate. In the early years the two are close — an RD's guaranteed rate is a real advantage over short periods. The gap only opens up over long horizons, and only if the assumed equity return actually materialises.
Change the assumed SIP return to a number below the RD rate and the comparison flips. That is not a quirk of the tool; it is the honest picture. There have been multi-year stretches when a fixed-rate deposit beat an equity fund.
RD and SIP formulas with variable key
Indian bank and post-office recurring deposits compound quarterly, so each monthly instalment is grown for the number of quarters (or part-quarters) it remains on deposit.
Formula
RD maturity = Σ P × (1 + i/4)^(4 × m/12) | SIP FV = P × [((1 + r)^n − 1) / r] × (1 + r)
- Where:
- P
- = monthly amount in rupees (same on both sides)
- i
- = annual RD interest rate as a decimal (6.5% → 0.065)
- m
- = months that a particular instalment stays on deposit
- r
- = assumed monthly return for the SIP = annual return ÷ 12 ÷ 100
- n
- = total number of monthly instalments = years × 12
The RD sum runs over every instalment: the first one stays on deposit for the full tenure, the last one for a single month. The SIP formula is the future value of an annuity due, the standard illustration used by AMFI and fund houses.
Worked example in rupees
Take ₹10,000 a month for 10 years, an RD at 6.5% and a SIP at an assumed 12%. You pay in ₹12,00,000 either way.
- RD maturity ≈ ₹16,89,880 — interest of about ₹4,89,880, contracted by the bank.
- SIP estimated value ≈ ₹23,23,391 — estimated gains of about ₹11,23,391, not guaranteed.
- Difference ≈ ₹6,33,511 in favour of the SIP, on these assumptions.
- At an assumed 10% instead of 12%, the SIP figure falls to about ₹20,65,520; at 8% it is about ₹18,41,657 — still ahead of the RD, but by much less.
- A shorter example: ₹5,000 a month for 12 months at 6.5% matures at about ₹62,143, i.e. roughly ₹2,143 of interest on ₹60,000 deposited.
The 12-month figure is worth internalising. Over one year, quarterly compounding on a 6.5% RD adds very little, because most instalments have barely been on deposit. Compounding needs time in both products.
This illustration assumes constant rates of 12%, 10%, 8% a year, assumed for this example; it is not a forecast. For reference, AMFI Best Practices Circular No. 109/2023-24 prescribes 12.93% for equity-fund illustrations: the mean of 10-year rolling returns of the Nifty 50 between 01/06/2013 and 30/05/2023 (Sensex 12.64%, 10-year G-Sec 7.20%). Calculators accept rates up to 13%.
Past performance may or may not be sustained in future and is not a guarantee of any future returns.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Comparison over different periods
| Period | Total paid in | RD maturity | SIP estimated value | Difference |
|---|---|---|---|---|
| 5 years | ₹6,00,000 | ₹7,09,908 | ₹8,24,864 | ₹1,14,955 |
| 10 years | ₹12,00,000 | ₹16,89,880 | ₹23,23,391 | ₹6,33,511 |
| 15 years | ₹18,00,000 | ₹30,42,651 | ₹50,45,760 | ₹20,03,109 |
| 20 years | ₹24,00,000 | ₹49,10,044 | ₹99,91,479 | ₹50,81,435 |
Both columns are before tax, and the tax treatment is not the same — see below. The RD column would also change if you renewed at a different rate; an RD locks its rate only for its own tenure.
This illustration assumes a constant 12% a year, assumed for this example; it is not a forecast. For reference, AMFI Best Practices Circular No. 109/2023-24 prescribes 12.93% for equity-fund illustrations: the mean of 10-year rolling returns of the Nifty 50 between 01/06/2013 and 30/05/2023 (Sensex 12.64%, 10-year G-Sec 7.20%). Calculators accept rates up to 13%.
Past performance may or may not be sustained in future and is not a guarantee of any future returns.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Guaranteed versus market-linked: the difference that matters
- An RD pays a contracted rate. The maturity value is known on day one and does not depend on markets. Bank deposits are covered by DICGC insurance up to the limit per depositor per bank.
- A SIP is market-linked. The value can fall, and there are periods in which it does. Nothing about the estimated figure is promised.
- An RD locks its rate for the tenure; if rates fall you keep yours, and if rates rise you do not benefit until renewal.
- Premature closure of an RD usually attracts a penalty and a lower effective rate. Open-ended mutual funds can normally be redeemed on any business day, subject to exit load and the scheme's rules.
- For money you need within two or three years — a deposit for a rented flat, a fee due next year — the certainty of an RD is usually worth more than the higher figure in the SIP column.
Tax: where much of the gap actually appears
RD interest is added to your income for the year and taxed at your slab rate, whether or not you withdraw it. Banks deduct TDS once the interest paid to you crosses the Section 194A threshold in a financial year, with a higher threshold for senior citizens; TDS is not an extra tax, it is an advance against what you owe. For someone in the 30% slab, a 6.5% RD returns closer to 4.5% after tax.
Equity mutual fund gains are taxed only when you redeem. Units held for more than 12 months attract long-term capital gains tax at 12.5% on the amount above ₹1.25 lakh in a financial year; units held for 12 months or less attract short-term capital gains tax at 20%. Because nothing is taxed until you sell, the whole balance keeps compounding in the meantime.
None of the figures shown on this page is after tax. Comparing a slab-taxed annual interest with a deferred capital gain is a real part of the decision, and it is worth doing with your own slab in front of you.
Which one suits which job
- Emergency fund and short-term certainty: RD, or a liquid/overnight fund if you want same-day access.
- A goal three years or more away where a fall in value would not force you to sell: an equity SIP is the usual choice, with the risk understood.
- A goal in between: hybrid or debt-oriented categories sit between the two, with less certainty than an RD and less volatility than equity.
- Not either/or: many households run both — an RD or FD as the safety layer and a SIP for the long-dated goals.
Frequently asked questions
Is a SIP better than an RD?
Not automatically. A SIP has produced more over long periods in the illustrations above, but only because a higher return was assumed. An RD's return is contracted and an equity SIP's is not — for a short goal, or money you cannot afford to see fall, the RD is often the more suitable choice.
How is RD interest calculated in India?
Bank and post-office recurring deposits compound quarterly. Each monthly instalment earns interest only for the months it stays on deposit, so the maturity value is the sum of every instalment grown at (1 + i/4) for the quarters it was invested.
What is the current RD interest rate?
It varies by bank, tenure and depositor category, and it changes. This calculator defaults to 6.5% as an assumption only — check your own bank's current RD card rate before relying on the output.
Is an RD completely safe?
The bank contracts to pay the maturity amount, and deposits are covered by DICGC insurance up to the limit per depositor per bank. The risk that remains is inflation: if the post-tax return is below inflation, the money loses purchasing power even though the rupee figure grows.
Is RD interest taxable?
Yes. It is added to your income and taxed at your slab rate every year, on an accrual basis. TDS is deducted once the interest crosses the Section 194A threshold for the year, and a higher threshold applies to senior citizens.
How are SIP gains taxed?
For equity-oriented funds, gains on units held over 12 months are long-term and taxed at 12.5% on the amount above ₹1.25 lakh in a financial year; units held for 12 months or less are short-term and taxed at 20%. Tax applies only when you redeem.
Can I lose money in a SIP?
Yes. The value of a mutual fund investment moves with the market and can fall below what you invested, particularly over short periods. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
What happens if I miss an instalment?
A missed RD instalment usually attracts a small penalty and may reduce the maturity amount. A missed SIP instalment is simply skipped by the fund house — there is no AMC penalty, though your bank may charge for a failed mandate.
Can I break an RD early?
Usually yes, with a penalty and interest recalculated at a lower rate for the period actually run. Check your bank's premature-closure terms before you commit to a long tenure.
Does the post office RD compound quarterly too?
Yes — the post office recurring deposit also compounds quarterly. Its rate is notified by the government and revised periodically, so check the current rate rather than assuming last year's.
Should I move my RD money into a SIP?
It depends on when you need the money and how you would react to a fall in value. Money already earmarked for a near-term commitment usually belongs where the amount is certain. Talk it through before switching.
Can Two Plus Two Nine help me start a SIP?
Yes. As an AMFI-registered Mutual Fund Distributor (ARN-171746) we help with KYC and SIP registration in regular plans on the FundzBazar platform. We do not sell bank deposits, and we do not offer investment advice — we distribute mutual fund schemes and explain how they work.