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Debt Mutual Funds VS Fixed Deposits

Currently, there are two most popular methods of investing - Fixed Deposits & Debt Mutual Funds. These two methods of investment are normally do meet primary goals of an investor which are low risk investment avenue, seek returns in 5 years & to gain atleast 8% to 9% of rate of returns. But then there are certain aspects like benefits, features that differentiate them & the difference in the way they work can be of advantage or disadvantage depending on the type of investor one is.

Debt Mutual Funds Bank Fixed Deposits
Return is market dependant hence may vary as per the prevailing conditions Returns are fixed & not subject to any market fluctuations
There is a scope for capital gain & loss In FDs, there is no scope for capital gain or loss
Tax liability only arises when the investor sells the units of the mutual fund These attract higher tax rate. Tax is also applicable on accrued income which is due to be received
There is no concept of premature withdrawal Penalty is levied on premature withdrawal
Are more tax efficient if the investment horizon is for more than 3 years Interest income is taxed. If the interest paid exceeds Rs. 10,000
Can liquefy investments quickly Funds are locked in until maturity date

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