Worked Example
RD-FD vs Equity-SIP: which builds more wealth over 10 years?
Scenario
Rohit, age 30, software professional in Pune, ₹12 lakh annual income, ₹50K monthly expenses, exploring this question for his financial plan
Inputs
- Years
- 10
- Amount INR
- 12,00,000
- RD-FD tax %
- 30
- RD-FD return %
- 7
- Equity-SIP tax %
- 12.5
- Equity-SIP return %
- 12
Calculation
- 1.
RD-FD effective post-tax rate
7% × (1 − 30% tax) → 4.9%
- 2.
Equity-SIP effective post-tax rate
12% × (1 − 12.5% tax) → 10.5%
- 3.
RD-FD corpus at year 10
₹12L × (1+0.049)^10 → ₹19.36 L
- 4.
Equity-SIP corpus at year 10
₹12L × (1+0.105)^10 → ₹32.57 L
- 5.
Wealth difference
|1936137 − 3256897| → ₹13.21 L
Conclusion
Equity-SIP wins by approximately ₹13.2 lakh over 10 years — driven by return rate.
Tradeoffs
Post-tax real returns matter more than nominal headline rates. RD-FD loses more to taxation. Risk profiles differ too — guaranteed vs market-linked. Adjust for risk tolerance.