Arbitrage Fund vs FD Calculator (2026) — Post-Tax Return Comparison

Compare Arbitrage Funds vs Bank Fixed Deposits in India. Calculate post-tax returns, tax saved under 12.5% LTCG vs 30% slab rate, and extra wealth generated.

Last updated: June 2026 for FY 2025-26Formula verified against RBI / government guidelinesReviewed by Ranveer Patel, Finance Professional
100% private: All calculations run in your browser. Your numbers never leave your device — no server, no storage, no account required.

How to Use This Arbitrage vs FD Calculator

Using our Arbitrage vs FD Calculator is simple and takes just a few seconds. Enter your values using the sliders or input fields above, and the results will update instantly — no need to click a calculate button.

All calculations are performed in your browser using standard financial formulas. Your data is never stored or transmitted to any server, ensuring complete privacy.

The results shown are estimates based on the inputs you provide. For precise figures, consult with your bank or financial advisor. Use this tool for quick comparisons, planning, and understanding how different variables affect your financial outcomes.

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Formula & Explanation

FD_post_tax = PreTax - (PreTax × SlabRate × 1.04) vs Arbitrage_post_tax = PreTax - Max(0, (PreTax - 1.25L) × 13%)

Calculates post-tax return for bank FD with quarterly compounding taxed at slab rate versus arbitrage fund taxed at equity capital gains rates.

Calculation Examples

₹10 Lakh Investment for 1 Year (30% Slab)

₹10 Lakh in 7.1% FD vs 7.4% Arbitrage Fund for a 30% tax bracket earner

FD Post-Tax: ~₹49,700 | Arbitrage Post-Tax: ~₹74,000 (Tax-free under ₹1.25L cap) | Tax Saved: ~₹24,300

Benefits

  • Accounts for 12.5% LTCG & ₹1.25L exemption
  • Calculates quarterly compound FD interest
  • Shows exact tax savings for 30% slab
  • Compares net in-hand maturity values

Use Cases

  • High net worth short-term treasury parking
  • Tax optimization for 30% slab earners
  • Replacing 1-year and 2-year bank FDs

About Arbitrage vs FD Calculator

Our Arbitrage Fund vs Bank FD Calculator shows why high-bracket taxpayers (20% and 30% slabs) prefer Arbitrage Funds over traditional Fixed Deposits. Arbitrage funds are taxed as equity mutual funds (12.5% LTCG above ₹1.25L exemption after 1 year), whereas bank FD interest is fully taxed at your slab rate.

Arbitrage Funds vs Bank Fixed Deposits: The Post-Tax Equation

For investors in the 30% or 39% income tax slab, traditional Fixed Deposits produce a disappointing real post-tax yield of barely 4.8% to 5.0% after TDS and slab taxes. Arbitrage funds offer a compelling alternative with equity-style capital gains taxation.

The Tax Advantage of Arbitrage Funds

Under Indian tax law, funds maintaining 65% or more in domestic equities qualify for equity taxation. By simultaneously buying in spot markets and selling in futures, arbitrage funds generate consistent spreads without equity downside risk while benefiting from the 12.5% LTCG rate and ₹1.25 Lakh tax-free threshold.

Frequently Asked Questions

Since April 2023, indexation benefits on debt mutual funds have been removed, making debt fund gains taxed at slab rate just like bank FDs. However, Arbitrage Funds invest predominantly in equities (hedging cash vs futures) and are legally classified as equity mutual funds. When held for at least 12 months, gains enjoy the ₹1.25 Lakh tax-free LTCG exemption, with excess taxed at only 12.5% (+ cess), compared to up to 31.2% or 39% slab rate on bank FDs.

Arbitrage funds are virtually risk-free from equity directional swings because every stock purchase in the cash market is simultaneously matched by an equal short position in the futures market. The return comes from the price spread (arbitrage), not stock appreciation. While not government-guaranteed like bank deposits up to ₹5 Lakh, they carry low volatility and zero default risk.

To get optimal tax efficiency, hold your arbitrage fund for at least 12 months (365 days). This qualifies the gain as Long Term Capital Gains (LTCG) taxed at 12.5% above the ₹1.25 Lakh annual exemption. Redemptions under 12 months are taxed as Short Term Capital Gains (STCG) at 20% (+ cess).

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