You invest ₹5 lakh in an FD at 7% p.a. (quarterly compounding) for 5 years. Maturity = ₹7,09,260, interest earned = ₹2,09,260. But at 30% tax slab, you pay ₹62,778 as tax — post-tax interest drops to ₹1,46,482. After 6% inflation, the ₹7,09,260 is worth only ₹5,30,033 in today's money — barely more than your original deposit. Compare this with a SIP at 12% which would grow ₹5 lakh to ₹8,81,170 with LTCG tax of only 12.5%. Read our full analysis: FD Real Returns After Inflation.
A Fixed Deposit is India's most popular savings instrument — safe, guaranteed, and predictable. But most FD calculators only show the nominal return. This FD Calculator India goes further by showing you the real return after accounting for both income tax and inflation — the two factors that silently erode your FD earnings.
This is what makes our calculator unique and directly connected to inflationcalculator.in's mission: helping you understand the true purchasing power of your money. A 7% FD in the 30% tax bracket with 6% inflation gives you a real return of approximately -1.1% per year. That means your money is losing value even while sitting in a "safe" FD. Use our Purchasing Power Calculator to see the full impact.
| Bank | General (1-2 yr) | General (3-5 yr) | Senior Citizen (Best) | Tax-Saver FD |
|---|---|---|---|---|
| SBI | 6.50% | 6.25-6.50% | 7.05% | 6.50% |
| HDFC Bank | 6.60% | 6.50% | 7.10% | 6.50% |
| ICICI Bank | 6.60% | 6.50% | 7.10% | 6.50% |
| Axis Bank | 6.70% | 6.50% | 7.25% | 6.50% |
| Post Office TD | 6.90% | 7.00-7.50% | Same rate | N/A (use NSC) |
| Small Finance Banks | 7.50-8.50% | 7.50-9.00% | 8.00-9.50% | Varies |
Rates are indicative as of FY 2025-26 and subject to change. Always verify with the bank before investing.
This table reveals the truth most banks do not show you — the real return on FD after tax and inflation:
| FD Rate | Tax Slab | Post-Tax Return | Inflation (6%) | Real Return | Verdict |
|---|---|---|---|---|---|
| 7.0% | 0% (no tax) | 7.00% | 6% | +1.00% | Barely positive |
| 7.0% | 5% | 6.65% | 6% | +0.65% | Marginal |
| 7.0% | 20% | 5.60% | 6% | -0.40% | Losing money |
| 7.0% | 30% | 4.90% | 6% | -1.10% | Wealth erosion |
| 8.5% (SFB) | 30% | 5.95% | 6% | -0.05% | Break-even at best |
For most taxpayers in the 20-30% bracket, FD returns are effectively negative in real terms. This does not mean FDs are bad — they serve a purpose as emergency funds and short-term parking. But for long-term wealth building, consider SIP in equity mutual funds, PPF (tax-free 7.1%), or NPS (9-12% with tax benefits).
| Investment | Return | Tax Treatment | Risk | Real Return (after 6% inflation, 30% tax) |
|---|---|---|---|---|
| Bank FD (7%) | 7.0% | Fully taxable at slab | Zero | -1.10% |
| PPF (7.1%) | 7.1% | Completely tax-free (EEE) | Zero | +1.10% |
| Equity SIP (12%) | 12.0% | LTCG 12.5% above ₹1.25L | Medium-High | +4.50% |
| NPS (10%) | 10.0% | Partial tax-free + 80CCD | Medium | +2.50% |
| SSY (8.2%) | 8.2% | Completely tax-free (EEE) | Zero | +2.20% |
| Debt MF (7.5%) | 7.5% | Slab rate (short) / 12.5% (long) | Low | -0.75% |
The message is clear: for goals beyond 3 years, tax-free instruments like PPF and SSY, or equity SIPs with favourable LTCG treatment, deliver significantly better real returns. FDs win only for emergency funds, very short-term goals, and capital protection needs. For the complete picture, explore our CAGR Calculator (includes Real CAGR), Tax Savings Calculator, and our guide on FD Real Returns After Inflation.
Despite negative real returns for most taxpayers, FDs serve important roles in a balanced financial plan. They require no CIBIL score check unlike loans, making them accessible to everyone. Emergency funds (6 months of expenses) should be in FDs or liquid funds for instant access. Short-term goals under 1-2 years — like a vacation, wedding down payment, or insurance premium — are well-suited for FDs because capital protection matters more than real return. Senior citizens in the 0-5% tax bracket earn a genuine positive real return on FDs and benefit from predictable monthly income through non-cumulative options. Tax-saver FDs help fill the Section 80C quota if ELSS volatility is unacceptable (education loan interest is separately deductible under Section 80E). Use our Retirement Corpus Calculator to plan the right mix of FD and equity for your retirement portfolio.
Fixed deposit interest in India is calculated using the compound interest formula: A = P x (1 + r/n)^(n x t), where P is the principal amount, r is the annual interest rate, n is the compounding frequency (4 for quarterly, which is the standard for most Indian banks), and t is the tenure in years. For example, ₹5 lakh at 7% for 3 years with quarterly compounding gives: 5,00,000 x (1 + 0.07/4)^(4x3) = ₹6,15,922. The interest earned is ₹1,15,922. Most Indian banks compound FD interest quarterly, though some offer monthly compounding for cumulative FDs.
As of FY 2025-26, FD interest rates in India for general citizens range from 3% to 7.25% depending on the bank and tenure. SBI offers 3.05-6.50% for general public and up to 7.05% for senior citizens. HDFC Bank offers 2.75-6.60% for general and up to 7.10% for seniors. Post Office Term Deposit offers 6.90-7.50%. Small finance banks like Unity and Ujjivan offer up to 8.25-9.0%. Senior citizens typically get an additional 0.25-0.50% across all banks. Tax-saver FDs (5-year lock-in) qualify for Section 80C deduction up to ₹1.5 lakh.
The real return on FD after adjusting for inflation and tax is often negative or near zero. For example, at 7% FD rate in the 30% tax bracket, your post-tax return is only 4.9% (7% minus 30% tax on interest = 7% x 0.7). With inflation at 6%, your real return is 4.9% - 6% = -1.1%. This means your purchasing power actually decreases despite earning interest. Even in the lowest tax bracket (5%), the real return is barely 0.65%. This is why financial planners recommend FDs only for short-term parking of funds or emergency reserves, not for long-term wealth building.
Banks deduct TDS (Tax Deducted at Source) at 10% on FD interest exceeding ₹40,000 per year (₹50,000 for senior citizens) across all FDs held with that bank. If PAN is not provided, TDS is deducted at 20%. TDS is deducted when interest is credited or at the end of the financial year, whichever is earlier. You can avoid TDS by submitting Form 15G (for individuals below 60 with total income below taxable limit) or Form 15H (for senior citizens). Note that TDS is just an advance tax — if your total tax liability is higher, you pay the balance when filing ITR.
In a cumulative FD, the interest is compounded and reinvested quarterly, and you receive the entire amount (principal + accumulated interest) at maturity. This gives higher effective returns due to compounding. In a non-cumulative FD, interest is paid out at regular intervals (monthly, quarterly, or annually) and is not reinvested. Cumulative FDs are better for wealth building as they maximise compounding. Non-cumulative FDs are suitable for retirees or anyone who needs regular income. This calculator models cumulative FDs with quarterly compounding by default.
A 5-year tax-saver FD offers Section 80C deduction up to ₹1.5 lakh, reducing your taxable income. At the 30% tax bracket, this saves ₹46,800 in tax (including 4% cess). However, the FD interest itself is fully taxable. Compare this with ELSS mutual funds which also qualify for 80C but offer potential 12-15% returns with only 3-year lock-in, and PPF which offers 7.1% returns that are completely tax-free (EEE status) with 15-year lock-in. Tax-saver FDs make sense only if you want guaranteed returns with zero risk and have already maxed out PPF and ELSS. Use our Tax Savings Calculator for the optimal 80C allocation.
FD returns of 6-7% are among the lowest compared to other investment options in India. PPF offers 7.1% completely tax-free. NPS offers 9-12% with partial tax-free withdrawal. Equity mutual fund SIPs have historically delivered 12-15% over 10+ year periods. Even Sukanya Samriddhi Yojana offers 8.2% tax-free. After adjusting for inflation (6%) and tax (30% bracket), FD real return is approximately -1.1%, making it a wealth-eroding instrument for long-term goals. FDs are best used for emergency funds, short-term goals under 1-2 years, and as the stable portion of a diversified portfolio.
Breaking an FD when rates rise depends on the penalty, remaining tenure, and rate difference. Most banks charge 0.5-1% penalty on premature withdrawal. If the new rate is 1%+ higher and you have 2+ years remaining, breaking and rebooking may be worthwhile. For example, on ₹10 lakh FD with 3 years remaining: upgrading from 6% to 7.5% earns approximately ₹45,000 more interest, minus the penalty of ₹5,000-10,000 — a net gain of ₹35,000+. However, also consider the tax impact of realized interest. For smaller rate differences or shorter remaining tenures, it is usually not worth the hassle and tax implications.
Disclaimer: FD interest rates are indicative for FY 2025-26 and vary by bank, tenure, and deposit amount. Rates are subject to change without notice. This calculator uses quarterly compounding which is standard for most Indian banks. TDS and tax calculations are approximate — consult a Chartered Accountant for your specific tax situation.