There were times when fixed deposits were considered as a good passive income with no risk. Every elder around us would advise putting a fixed deposit for a safe return with less risk. FD rates dipped significantly during the pandemic years, but they’ve recovered meaningfully since — still, the same real-return math from this post is worth understanding whenever rates move, so you can judge for yourself whether an FD is actually beating inflation at any given time.
Check our current FD interest rates guide for today’s actual rates — they change regularly, so any specific number here will eventually go stale. What doesn’t go stale is the calculation method below, which you can rerun with whatever the current rate happens to be.
As of the current quarter, major bank FDs sit around 6.25-6.5% per annum for general depositors. If you invest ₹1,00,000 at 6.5% per annum, the interest you earn is ₹6,500/year.
And earnings from fixed deposits are taxed according to your tax slab — if you’re in the 10% tax slab, that’s a deduction of ₹650.
There is one more factor which we never calculate during our investments, the inflation rate %.
If you are wondering what is inflation rate % , it is nothing but the price change which happens year on year .Like last year you would have purchased a kilo rice for Rs 50, but the same rice would cost Rs 53 the next year or in the next 6 months.
India’s retail inflation has generally run in the 4-6% range in recent years, though it moves month to month — check the current CPI figure from the RBI or MOSPI for the latest number when you’re doing this math yourself.
Post-tax FD return (5.85%) minus inflation (say, 5%) = 0.85% real return.
This is the honest math of an FD — at current rates, the real (inflation-adjusted) return is modest but usually still positive, unlike during the 2021 pandemic dip when FD rates briefly fell close to savings-account levels and real returns did turn negative. The lesson holds either way: always check the current rate against current inflation before assuming a “safe” investment is actually growing your money in real terms.
Any investment option which has returns more than your FD rate plus inflation is worth considering as a genuine alternative — LIC and mutual funds are commonly cited options where potential returns can be more viable, though they also carry more risk than a bank FD. See our PPF calculator too — PPF is currently offering a genuinely competitive, fully tax-free rate as an alternative government-backed option.
