Debt Fund vs FD Calculator

For debt mutual fund units acquired on or after April 1, 2023, gains are taxed at the investor's income tax slab rate with no indexation benefit — the same rate that already applies to Fixed Deposit interest. This calculator assumes such a newly acquired debt fund. On the surface this makes the two look identical for tax purposes — but the timing of taxation differs sharply. FD interest is taxed every year as it accrues, whether or not the investor withdraws it, which means the tax bill reduces the amount left to compound each year. A debt fund, by contrast, is not taxed at all until the units are actually redeemed — the full pre-tax amount keeps compounding for the entire holding period, with tax paid only once, at the end. This calculator shows exactly how much that timing difference is worth for a given amount, tenure, and expected rate.

FD (annual tax drag): each year, grossInterest = balance × ((1 + r/n)^n − 1); tax = grossInterest × slabRate; balance += grossInterest − tax

Debt Fund (deferred tax): grossMaturity = amount × (1 + r)^tenure; tax = (grossMaturity − amount) × slabRate; finalValue = grossMaturity − tax

Where r = annual rate, n = compounding periods/year, slabRate = tax slab as a decimal.

Tax Drag

The reduction in compounding growth caused by paying tax on gains before the investment matures, rather than at the end — FD interest is taxed annually, creating drag; debt fund gains are taxed once, at redemption.

Indexation

A benefit that previously let debt fund investors adjust their purchase cost for inflation before calculating capital gains tax — removed for debt funds acquired on or after April 1, 2023.

TDS (Tax Deducted at Source)

Tax a bank withholds on FD interest exceeding ₹50,000 (₹1,00,000 for senior citizens) per bank per PAN in a financial year — a collection mechanism, not the underlying tax liability itself, which applies regardless of the threshold.

Post-Tax CAGR

The annualized growth rate of an investment after accounting for tax paid, calculated from the post-tax final value rather than the pre-tax maturity amount.