Difference between Mutual Funds, FDs and SIPs

By Samyuktha Sivakumar

Mutual Funds

Mutual funds are an investment vehicle, where we can invest money which can be cumulatively put in securities, bonds, stocks etc

People buy shares in mutual funds and their share represents a part ownership in the fund and the income it generates

100% Income Tax exemption on all Mutual Fund dividends

Equity Funds - Short term capital gains is taxed at 15%. Long term capital gains is not applicable

Debt Funds - Short term capital gains are taxed as per the slab rates applicable. Long term capital gains tax to be lower of - 10%

Fixed Deposit

A Fixed Deposit offers greater returns on the principal invested compared to the returns generated from a savings account

People need to deposit a considerable amount as a one-time payment for a fixed time frame

Investment Tenure ranges from 6 months to 10 years

Interest Rate comes from 2.75% – 7% p.a. Minimum Investment starts from Rs.500

Tax is incurred on the basis of the income tax slab under which the individual falls


Systematic Investment Plan (SIP)  allows the investor to invest a fixed amount at regular intervals in an MF scheme

With this people can invest money in a hassle-free manner, without waiting for a seasonal time

Minimum Investment Starts from Rs.500 A return of 12-18% can be expected whereas from mid-cap equities, a return of 14-17% is expected

In case of a long-term debt-based mutual fund, one can expect a return of  6 – 9 % p.a.

However, 15% tax is charged if the units are sold within a year