FD and Debt Fund Investment Returns Calculator

When it comes to parking/saving hard-earned money in a safe investment plan, most of us think about the Fixed Deposit scheme. This investment instrument is provided by almost all the banks and it offers a better interest rate than a normal savings account. Even though FD comes with many benefits, its interest rates are coming down drastically which enforces the investors to look for other investment opportunities that are as safe as Fixed Deposit.

FD and Debt Fund Investment Returns Comparison Calculator - Free Excel Download

When it comes to finding an alternative investment option for FD, Debt Mutual Funds or Debt Funds come first in mind. However, there are conflicts of opinions because Debt Funds doesn’t offer fixed interest rates and it may show negative returns in the short term. But, in the long run, debt funds are known to result in higher returns. Unlike, equity-linked mutual funds, debt fund is not investing money in share market instead they put money in bonds and other fixed-income securities that makes it more secure investment.

Which Generates More Returns FD or Debt Fund?

Both investment options are good for the long term and safe for investment. However, for neck to neck comparison, I have build this small FD and Debt Fund return calculator. It is not only showing the investment return but shows the difference in return with the same investment and interest rates in both plans.

Following is the screen which shows the investment of INR 1,00,000 in FD and Debt Fund for 3 years and generating 6% returns. You can see the difference, but as per my experience, if you stay invested for more than 3 years in a debt fund, you can expect more than 8% annual returns – enough to beat the inflation.

FD and Debt Fund Investment Returns Calculator

It is very simple to use and requires only few input to generate the output.

In order to use this FD and Debt Fund comparison calculator, enter the following information

  • Investment – The invested amount
  • Interest Rate – The fixed rate of interest
  • Tenure – Investment Duration and it should be in years. Makes sure to keep it more than 3 years for proper comparison.
  • Investment Date – Date of the investment in Fixed Deposit or Debt Fund
  • Maturity Date – It will be generated automatically based on the Investment Tenure
  • Cost Inflation Index – There are two fields for this, the Cost Inflation Index value should be taken for both i.e. investment date and maturity date. Click on Check CII link to open the Indian income tax site to see the latest value. It has the CII value for each financial year.

Since the debt fund has the benefit of Indexation and the returns vary based on the inflation rate, the Inflation Adjusted Initial Investment value is calculated based following formula:

(CII of maturity financial year/CII during Investment financial year) * Initial Investment

This reduces the total taxable value and debt results flat 20% income tax on taxable income if sold or withdrawn after 3 years. If you withdraw debt fund within 3 years then taxes will be based on your income slab like FD.

Access the file here and try comparing returns from both the investment plan. Let me know if you stuck somewhere or need any clarification. You can also consider this FD Calculator android app as a handy tool to calculate the compound/simple interest, EMI calculation, and FD calculation.

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Hope, this will help you in making an informed decision in your financial or investment planning. Debt Funds are the best option and surely an alternative to FD if one can take a little risk and keep patience at least for three years. However, you must consult with your financial advisor before investing in any of these investment instruments.

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