Real Rate of Return Calculator (Inflation-Adjusted)
By Santaji GadepatilinUpdated October 27, 2026
The real rate of return is what your investment earns after inflation. It shows whether your money is actually growing in buying power.
How to use the real rate of return calculator
Enter the nominal return (interest rate or investment return), the tax rate on those returns (0 if tax-free) and the inflation rate. You get the after-tax return and the real return.
The Fisher equation
Real return = (1 + nominal) ÷ (1 + inflation) − 1
With tax, use the after-tax return as the nominal: nominal × (1 − tax rate).
Real returns at a glance
| Nominal | Inflation 3% | Inflation 5% | Inflation 7% |
|---|---|---|---|
| 4% | +0.97% | -0.95% | -2.80% |
| 6% | +2.91% | +0.95% | -0.93% |
| 7% | +3.88% | +1.90% | +0.00% |
| 8% | +4.85% | +2.86% | +0.93% |
| 10% | +6.80% | +4.76% | +2.80% |
| 12% | +8.74% | +6.67% | +4.67% |
After-tax examples (5% inflation)
| Investment | Nominal | Tax | After tax | Real |
|---|---|---|---|---|
| FD at 7%, 30% slab | 7% | 30% | 4.9% | −0.10% |
| FD at 7%, 10% slab | 7% | 10% | 6.3% | +1.24% |
| PPF at 7.1% (tax-free) | 7.1% | 0% | 7.1% | +2.00% |
| Equity at 12%, 12.5% LTCG (approx.) | 12% | 12.5% | 10.5% | +5.24% |
Equity tax is simplified here; actual tax depends on holding period and exemptions.
Why real return matters
A goal planned in today’s money needs a real return to reach it. Saving for something that costs 10 lakh today in 15 years at 6% inflation actually needs about 24 lakh — see the inflation calculator.
Real vs nominal growth over time
At a 2% real return, money doubles in purchasing power in about 35 years. At 5% real, it doubles in about 14 years.
Frequently asked questions
What is the real rate of return?
The return after removing the effect of inflation — how much your purchasing power actually grows.
Why not just subtract inflation from the return?
Subtraction is a close approximation for small rates. The exact Fisher formula is (1 + nominal) ÷ (1 + inflation) − 1. 7% with 5% inflation is 1.90%, not 2%.
Can the real return be negative?
Yes. If inflation is higher than your after-tax return, your money is losing purchasing power even though the balance grows.
How does tax affect the real return?
Tax reduces the nominal return first. A 7% FD taxed at 30% gives 4.9% after tax; with 5% inflation the real return is slightly negative.