worldofcalcsReal Return Calculator
Return after tax
4.90%
Real return
-1.04%
- Quick estimate (after-tax return − inflation): -1.10%
- ₹1,00,000 grows to ₹1,61,345 in 10 years, but that will only buy what ₹90,094 buys today.
- Your money is losing buying power: the return after tax is lower than inflation.
What is a real return?
The real return is what your money actually gains in buying power. A 7% FD sounds good, but if you pay 30% tax on the interest and prices rise 6% a year, you're slightly poorer each year. This calculator takes out tax and then inflation, so you can compare an FD, PPF or mutual fund on what they really earn.
Real return formula
After-tax return = return × (1 − tax rate) · Real return = (1 + after-tax return) ÷ (1 + inflation) − 1
Subtracting inflation from the return is a quick estimate. The exact formula divides instead, because inflation also erodes the interest you earn. The difference is small at low rates.
Getting a positive real return
- Interest from FDs, RDs and savings accounts is taxed at your slab rate every year, which hurts most in the 20% and 30% slabs.
- PPF, SSY and EPF (within limits) are tax-free, so their full rate counts. PPF at 7.1% beats a 7% FD for anyone who pays tax.
- Equity mutual fund gains held over a year are taxed at 12.5% only above ₹1.25 lakh of gains a year, and only when you sell. This calculator applies the tax every year, so it's slightly conservative for funds.
- India's retail inflation has averaged about 5–6% a year over the long run. Use a higher figure for education or healthcare goals, where costs rise faster.
- The 4% health and education cess is added to income tax. Enter 31.2% instead of 30% if you want to include it.
Worked example: FD in the 30% slab
- FD return 7%, tax slab 30%, inflation 6%
- Return after tax: 7% × (1 − 30%) = 4.90%
- Real return: 1.049 ÷ 1.06 − 1 = −1.04% a year
- ₹1,00,000 grows to ₹1,61,345 in 10 years
- But in today's prices it is worth only ₹90,094, a loss of buying power
Real returns at 6% inflation
Typical returns after tax at your slab, with inflation taken out.
| Investment | Return | Tax | After tax | Real return |
|---|---|---|---|---|
| Savings account | 3% | 30% | 2.10% | -3.68% |
| Bank FD (30% slab) | 7% | 30% | 4.90% | -1.04% |
| Bank FD (no tax) | 7% | 0% | 7.00% | 0.94% |
| PPF | 7.1% | 0% | 7.10% | 1.04% |
| Senior Citizen Savings Scheme (30% slab) | 8.2% | 30% | 5.74% | -0.25% |
| Equity mutual fund | 12% | 12.5% | 10.50% | 4.25% |
Illustrative rates. Equity returns vary a lot from year to year.