Fixed-income guide
Compare fixed deposits and debt funds by capital certainty, access to money, taxation and the time horizon of your goal.
Project FD maturityFor short-term goals, the ability to protect capital and access money can matter more than chasing the highest expected return. Compare the product with the goal’s date and flexibility needs.
How to use this guide
An FD offers a known rate for its terms, while a debt fund’s value can move with interest rates, credit quality and market conditions. For a fixed-date goal, certainty can be more useful than a slightly higher expected return.
Check premature withdrawal terms for an FD and redemption timing, exit costs and settlement for a debt fund. Keep the money accessible if the date or amount of the goal can change.
Tax treatment depends on the product, holding period and your circumstances, so compare the amount you expect to keep. Include tax on interest, capital gains and any applicable surcharge or cess.
Review the underlying portfolio and risk profile instead of assuming every debt-oriented product has the same level of safety. A higher yield can reflect additional credit or duration risk.
Interest-rate changes can affect a debt fund’s NAV, especially when its portfolio has longer duration. Align the portfolio’s risk with the date you need to withdraw.
Use a goal bucket, note the required amount and set a review date. Avoid chasing daily returns when the primary job of the money is to be available when needed.
Common questions
No. An FD has a contracted interest rate subject to its terms, while a debt fund owns market instruments and its value can fluctuate.
It depends on the goal date, tax position, liquidity needs and risk tolerance. A fixed-date goal often prioritises capital certainty and access over return optimisation.
Yes. Interest-rate movement, credit events and market conditions can reduce the NAV. Review the fund’s portfolio, duration and risk indicators before investing.
Shortlist
Reserve Bank of India
8.05%
current yield
Sovereign-backed, resets every 6 months.
Government of India
7.18%
fixed coupon
Fixed-coupon government security.
IDFC FIRST Bank
7%
p.a. interest
Up to 7% interest, monthly credited.