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FD vs Debt Mutual Funds | Tax Benefit Removed For Debt Mutual Funds March 31 2023Indira Securities

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FDs (Fixed Deposits) and Debt Mutual Funds are both popular investment options that are considered relatively safe as they provide stable returns with low risk. However, there are some differences between the two:

Returns: Fixed deposits offer fixed returns, whereas debt mutual funds' returns are not fixed and depend on the performance of the underlying assets.

Liquidity: Fixed deposits have a fixed tenure and cannot be withdrawn before maturity without penalty. In contrast, debt mutual funds offer high liquidity as they can be redeemed at any time.

Risk: Debt mutual funds carry a higher risk than fixed deposits because the returns are not guaranteed, and the value of the underlying assets may fluctuate. Fixed deposits, on the other hand, are considered a low-risk investment option as they offer guaranteed returns.

Taxation: Fixed deposits are taxed according to the investor's tax slab, whereas debt mutual funds held for less than three years are taxed at the investor's tax slab, while those held for more than three years are taxed at 20% with indexation benefit.

In summary, fixed deposits are a good option for investors looking for guaranteed returns with low risk and are willing to lock in their funds for a fixed period. Debt mutual funds are suitable for investors seeking higher returns than fixed deposits and can tolerate some risk. However, they need to be aware that the returns are not guaranteed, and the value of their investments may fluctuate.


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1. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020.

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