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Debt Mutual Funds vs Fixed Deposits Scheme - Which is the best option?  

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From generations we are investing our finance in fixed deposits but now a days there are many low risk investment options available. I want to understand Why invest in Debt Funds? What is the different between bank fixed deposit vs mutual fund fixed deposit? Can you please let me know, which is the best option to manage my finances.

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Fixed deposits have always been a part of an Indian family from our grandparents, parents. They all ended up in investing once in the lifetime in FDs. It was the best option to earn interest safely during old days. In the recent times, mutual funds has been a part of 1 out of 2 Indian family. Mutual funds have overtaken FD to be considered as the popular long-term investment goal.

Let’s now analyse difference between Debt Mutual Funds vs Fixed Deposits Scheme for the best investment option.

ParticularsDebt FundsFixed Deposits
Rate of Returns:6-8%6-8%

Dividend Option:

YesNo
Risk:LowLow
Liquidity:HighLow
Investment Option:Can choose either an SIP investment or a lumpsum investmentCan only opt for a lumpsum investment
Accounting and Taxation:Short-term debt fund( less than 3 years) gains are added to your income . While long-term gains, they are taxed at 20% after the indexation benefits.Fixed deposit returns are added to your income and they are taxed according to the applicable tax slabs.

In conclusion, there are lot of advantages of Debt Mutual Funds over Fixed Deposits Scheme. Debt Mutual funds have various types of investment options like SIP Mutual Funds or Lumpsum Mutual Funds, they can easily be converted into cash during any emergencies as they do not have any lock-in period and you also save a lot of amount during taxation. So according to me if you ask me,  Debt Mutual Funds vs Fixed Deposits Scheme - Which is the best investment option? I would definitely say Debt Mutual Funds without any second thought.

This post was modified 8 months ago by WikiFinancepedia Team