Inflation-Adjusted Return Calculator
Real return and purchasing power of investments.
Inputs
This calculator is for general information only and isn't financial advice. Rates, tax rules, and your actual eligibility depend on your specific situation — check with your bank or a qualified advisor before acting on it.
Formula
Real return = (1 + nominal) / (1 + inflation) − 1
Nominal return is what your investment statement shows. Inflation erodes purchasing power, so the real return is the growth after adjusting for inflation. A 12% nominal return with 6% inflation yields roughly 5.66% real return — what your money actually gained in buying power.
Worked example
At 12% nominal return and 6% inflation over 10 years, ₹1 lakh grows to ₹3.11 lakh nominally but its purchasing power is only ₹1.79 lakh in today's rupees — a real return of about 5.66% per year. This is why beating inflation matters more than headline returns.
Where this can give the wrong answer
- If inflation exceeds nominal return, real return is negative — your balance grows but buys less, common in high-inflation periods with conservative investments.
- This uses a constant inflation rate — actual CPI varies year to year, and personal inflation (education, healthcare) often exceeds headline CPI.
- Taxes on nominal returns further reduce real returns — this calculator shows pre-tax real return only.
FAQ
- The approximation (12% − 6% = 6%) overstates real return. The exact formula (1.12 / 1.06 − 1 = 5.66%) accounts for compounding interaction between returns and inflation — use the exact version for multi-year planning.