Real Return Calculator (After Inflation and Tax)

What a return is really worth once prices have risen: the exact real return, the rough “return minus inflation” shortcut beside it, and the real return after tax.

Last updated 24 Sep 2026

Real rate of return

CurrencyReturn + inflation + tax → real return

Return before tax (% a year)The yearly return on a deposit, bond or fund, before tax. For a fund, use an assumption, not a promise.

Inflation (% a year)Defaults to your currency’s central-bank target (India 4%, US/UK/Euro/Canada 2%). Actual inflation often runs higher — try 5–6% for a cautious plan. For AED, SAR, PKR, BDT and MYR there is no official target: enter your own estimate.

Your tax rate on the return (%)Your own marginal rate on this interest or gain, 0 if none. It is taken from each year’s return as it is earned. The page does not know your country’s slabs or thresholds.

Amount to illustrate ($)

Years to show

2.88% a yearExample

A 7% return, 4% inflation, no tax

The Fisher relation, exactly

1 + real = (1 + nominal) ÷ (1 + inflation); after tax: real = [1 + n × (1 − tax)] ÷ (1 + i) − 1

n: the nominal (money) return a year, as a decimal
i: inflation a year, as a decimal
tax: your tax rate on the return, taken from each year’s return
shortcut: n − i, which ignores that inflation also erodes the return itself. Its error is exactly i × the real return: small at low rates, larger as they rise

Worked example

A 7% return, 4% inflation, no tax
Exact: 1.07 ÷ 1.04 − 1 = 2.88% a year; the shortcut says 7 − 4 = 3%
$1,00,000 becomes $1,96,715 in 10 years, but prices rise to 1,48,024 for every 1,00,000, so it buys what $1,32,894 buys today
The classic case, a 7% deposit with 6% inflation: 1.07 ÷ 1.06 − 1 = 0.94%, not 1%
Taxed at 30%, the deposit earns 7 × 0.7 = 4.90%, and 1.049 ÷ 1.06 − 1 = -1.04%: it loses buying power

Real return after tax, with 6% inflation

Exact figures, tax taken from each year’s return. At 6% inflation a 7% return taxed at 30% loses buying power.
Return before tax	No tax	20% tax	30% tax
6%	0.00%	-1.13%	-1.70%
7%	0.94%	-0.38%	-1.04%
8%	1.89%	0.38%	-0.38%
10%	3.77%	1.89%	0.94%
12%	5.66%	3.40%	2.26%

Why “7% minus 6% inflation” is not 1%

A return is paid in money, and money buys less each year when prices rise. The real return is what a return is worth in buying power. Irving Fisher set out the relation in 1930: one plus the real rate equals one plus the nominal rate divided by one plus inflation. The everyday shortcut, return minus inflation, is close when both are small, but it always exaggerates, because it ignores that inflation also erodes the return itself: a real gain looks bigger than it is, and a real loss looks worse. A 7% deposit with 6% inflation earns 0.94% a year in real terms, not 1%. At a 12% return and 10% inflation the real return is 1.82%, not 2%.

Tax makes a bigger difference, because it is charged on the whole return, including the part that only keeps up with prices. Tax the same 7% deposit at 30% and it earns 4.90% after tax, below 6% inflation, so the real return is -1.04% a year. Over ten years $1,00,000 on those terms buys what $90,094 buys today, even though the account balance rose every year. The chart shows this: the account balance before tax, after tax, and the after-tax balance in today’s money.

The page takes tax from each year’s return as it is earned, which is how interest on a deposit is usually taxed. Gains on shares and funds are often taxed only when you sell, and at different rates, so for them the after-tax figure here is on the cautious side. The inflation that matters is the one on the things you buy; the default is your central bank’s target, and actual inflation is often higher. To measure the return an investment has actually earned, use the CAGR calculator; for a deposit with quarterly compounding and payout options, the FD calculator; to see how prices themselves grow, the inflation calculator. This is arithmetic on the figures you enter, not financial advice.

Frequently asked questions

How do you calculate the real rate of return?

Real return = (1 + nominal return) ÷ (1 + inflation) − 1. A 7% return with 4% inflation is 1.07 ÷ 1.04 − 1 = 2.88% a year.

Is the real return just the return minus inflation?

Only roughly. Subtracting exaggerates the real return, and the gap grows with the rates: 7% with 6% inflation is 0.94%, not 1%; 12% with 10% inflation is 1.82%, not 2%.

Does a fixed deposit beat inflation after tax?

It depends on your tax rate and on inflation. A 7% deposit with 6% inflation earns a real 0.94% before tax, but at a 30% tax rate the real return is -1.04% a year: the money buys less each year.

Why is tax applied every year?

Because that is how interest on deposits is usually taxed: as it is earned. Gains on shares and funds are often taxed only on sale and at different rates, so for them the page’s after-tax figure is cautious.

Related calculators

References

Fisher I. The Theory of Interest. New York: Macmillan; 1930. The relation between nominal and real rates of interest.
Bodie Z, Kane A, Marcus AJ. Investments. McGraw-Hill. Real and nominal rates of return (the Fisher relation), after-tax returns, dividend yield and total return, and price–earnings ratios.
Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. McGraw-Hill. Present and future values, annuities, and nominal versus real rates of interest.
Central-bank inflation targets used as default inflation by currency: Reserve Bank of India (4% CPI, flexible inflation targeting framework); U.S. Federal Reserve (2% PCE); European Central Bank (2%); Bank of England (2% CPI); Bank of Canada (2%); Reserve Bank of Australia (2–3%); Bangko Sentral ng Pilipinas (3% ± 1). Actual inflation often runs above target.