Fixed Deposit Planner — the real number
Model pre-tax bank maturity, then optionally apply your slab and 6% inflation to see real purchasing power — not just the headline rate. Guide: why the headline FD rate is not your real return
FD Inputs
Reality check
Results
FD value vs inflation benchmark
Most FD calculators stop at maturity value. This one goes further — it applies your tax slab to the interest earned, then adjusts for 6% inflation to show your real purchasing power gain. The number that matters isn't what your bank promises. It's what you can actually buy more of when the FD matures.
How we calculate
Interest is compounded annually at the stated rate. Tax is applied to total interest earned at your marginal slab rate. Real return uses the Fisher equation: real rate = ((1 + after-tax nominal rate) ÷ (1 + inflation rate)) − 1, where inflation is fixed at 6% p.a. Figures apply to cumulative FDs; non-cumulative (periodic payout) FDs will show different breakdowns. No black boxes — the formula is the formula.
What is FD?
A Fixed Deposit (FD) is a savings instrument where a lump sum is locked in for a fixed tenure at a guaranteed interest rate. It is one of India's most widely used instruments for capital preservation, offered by banks, post offices, and NBFCs. Unlike market-linked instruments, an FD guarantees your principal and interest — but that safety comes at the cost of real returns once tax and inflation are accounted for.
Benefits of FD
- Predictable and stable returns.
- Capital protection.
- Flexible tenures.
- Simple and widely available.
- DICGC insurance coverage up to ₹5L per depositor per bank.
- Senior citizen interest rate premium of ~0.25–0.50%.
How FD Works
-
Deposit lump sum amount
Invest once for a chosen tenure. -
Fixed interest rate
Rate remains unchanged during tenure. -
Interest payout or reinvestment
Can be periodic or cumulative. -
Maturity
Receive principal plus interest.
FAQs
Is FD risk-free?
FD has low risk, but is not inflation-protected.
Are FD returns taxable?
Yes, FD interest is fully taxable as per income slab.
Does FD beat inflation?
FDs often lose purchasing power over long durations.
Which FD calculators show tax-adjusted returns?
Most bank-provided FD calculators show only maturity value — they have no incentive to show how much tax erodes returns. SmartFinance applies your actual marginal slab rate to interest earned, then computes real post-inflation yield. This gives you the number that actually matters: what your purchasing power will be when the FD matures, not just what your bank account will show.
How do I compare FD returns across different tenures?
Use the tenure slider to compare scenarios. Key insight: longer tenures compound more, but your tax liability also compounds since all interest is taxable. A 10-year FD at 7% may feel safer than a 3-year one, but the real post-tax, post-inflation return difference is smaller than the headline suggests. For amounts above ₹5L, also consider the DICGC insurance ceiling of ₹5L per depositor per bank.
Does a fixed deposit beat inflation in India?
Rarely over longer tenures once you account for taxes. At 7% interest with a 30% tax slab, your after-tax yield is approximately 4.9%. With CPI inflation averaging 5.5–6.5% in India over recent years, the real return is often near zero or negative. FDs are best used for capital preservation and liquidity needs, not long-term wealth creation.
What should I compare FDs against?
For similar safety: RDs for regular monthly savers, PPF for tax-free long-term savings (15-year lock-in, EEE tax status). For higher real returns with more risk: equity mutual funds via SIP have historically outperformed FDs post-tax over 7+ year horizons. Compare real yields across instruments before committing — SmartFinance has calculators for all of these.