What is an inflation-adjusted or real return?

It is your return after removing the effect of rising prices: what the money will actually buy rather than what the statement says. A 12% nominal return with 6% inflation is roughly a 6% real return.

What inflation rate should I assume for India?

6% is a common planning figure for general goals. Education and healthcare have historically run higher, so use a larger number for those specifically.

Does the inflation adjustment change my actual maturity value?

No. You still receive the nominal amount. The adjustment restates it in today’s purchasing power so you can judge whether it funds what you are saving for.

How do I protect a long-term goal from inflation?

Set the target in today’s money, assume a realistic inflation rate rather than an optimistic one, and increase contributions annually so the amount you invest does not lose ground in real terms.

Real returns

What will your SIP actually be worth?

A calculator that tells you ₹50 lakh in fifteen years is telling you a number in rupees that will not buy what rupees buy today. The real figure is the one worth planning against.

See my real return

₹10,000 a month at 12% for 15 years, shown both ways

	Nominal	In today’s money at 6% inflation
Total invested	₹18,00,000	₹12,03,010
Maturity value	₹50,45,760	₹21,05,419
Gain over what you put in	₹32,45,760	₹9,02,409

Same investment, same return. The second column is what the money will actually buy, and it is the column that decides whether a goal is funded. Each instalment is also counted in today’s money there, so the gain compares like with like.

Why nominal figures mislead

Inflation compounds exactly as returns do, quietly and in the opposite direction. At 6% a year, prices roughly double every twelve years. A projection that ignores this is not wrong arithmetically; it is answering a question you did not ask.

The distinction has a name: nominal return is what the statement says, real return is what it buys. Only the second one funds anything.

How the adjustment works

The maturity value is divided by inflation compounded over the same period, the future amount restated in today's rupees. It does not change what you will receive. It changes what you understand about it.

A useful shortcut for a rough check: subtract inflation from your expected return to get an approximate real rate. 12% nominal against 6% inflation is roughly 6% real, which is a very different planning input from 12%.

What inflation rate to use

Headline CPI understates what most households experience, because the things people save for (education, healthcare, housing in a growing city) have historically risen faster than the basket.

For general goals, 6% is a reasonable planning figure. For an education corpus or a medical buffer, a higher assumption is the honest one. Setting it too low is the more dangerous error, because it makes an underfunded plan look finished.

What to do about it

Set goals in today's money and let the calculator gross them up. "I need ₹30 lakh in today's terms for my child's education" is a target you can reason about. "I need ₹75 lakh in 2044" is a number you cannot sanity-check against anything.

Then raise contributions over time. A flat SIP loses ground to inflation every year by definition; a step-up SIP is the straightforward correction.

Frequently asked questions

Results are estimates for education and planning, not financial advice.

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