Even the Laggard Flexi‑Cap Fund Can Beat the Top Fixed Deposit – Here’s Why Tax Matters

When I first skimmed the numbers, I thought it was a typo. The “worst” flexi‑cap mutual fund in a 10‑year universe somehow nudged ahead of the country’s highest‑yielding fixed deposit? Turns out, the maths checks out – and the story behind it is a neat reminder that taxes can flip the script.

Our reference point is the Taurus Flexi Cap Growth fund. Over the past decade it posted a compound annual growth rate (CAGR) of just 9.71 %, the lowest among all surviving flexi‑cap schemes as of July 2026. By contrast, the best‑rated bank FD – offered by Suryoday SFB – promised a tidy 7.25 % per annum.

To keep things simple, imagine you parked a lump sum of ₹1 crore in each vehicle and let it sit for ten years. Before any tax bite, the equity‑heavy Taurus fund would swell to roughly ₹2.53 crore, the FD to about ₹2.01 crore, and even a pure‑play arbitrage fund (Kotak Arbitrage Fund Regular) would end near ₹1.78 crore.

Now the tax nuance kicks in. Fixed‑deposit interest is taxed every year at the investor’s marginal slab – we used the top 30 % bracket. Equity gains, on the other hand, enjoy a one‑time long‑term capital‑gains (LTCG) levy of 12.5 % after an exemption of ₹1.25 lakh. After applying these rules, the FD’s net corpus drops to about ₹1.71 crore, while the Taurus Flexi Cap ends up at ₹1.68 crore – almost neck‑and‑neck with the arbitrage fund, which also lands near ₹1.68 crore.

What does this tell us? First, the tax treatment of equity can be far kinder than the slab‑based tax on deposit interest, especially for high‑income investors. Second, survivorship bias matters – the Taurus fund survived the whole period, but many under‑performers have already disappeared, so the “worst” surviving fund isn’t necessarily the absolute worst ever.

We should also remember that the analysis assumes a single, upfront lump sum. A systematic investment plan (SIP) would smooth out volatility and could shift the outcome. Moreover, the tax landscape isn’t set in stone; any future change to LTCG rates or FD taxation would alter the balance.

Bottom line: In a high‑tax environment, a poorly‑performing equity fund can still edge out the most attractive FD, simply because equity earnings are taxed at a lower, flat rate. It’s a gentle nudge for investors to look beyond headline yields and factor in the after‑tax picture before locking their money away.