Real Returns Calculator

Use this real returns calculator to calculate the real return from a financial instrument after accounting for tax.

RBI inflation indexed bondsWhat is a real return? A real return is the return from a financial instrument after accounting for inflation and taxes. Most discussions of real return ignore taxes and simply account for inflation.

A real return gives an idea of how much the purchasing power of a lumpsum has changed upon maturity of a financial instrument.

You will need to calculate the  real return after taking taxes into account to check if the buying power has been protected from inflation.

The post-tax real return is calculated as shown in the picture

  • Real returns CalculatorIf the real return is 1%(-1%)  then the purchasing power of the lump sum has enhanced (diminished) by 1%  (-1%).
  • If the real return is zero, the purchasing power of the lump sum is unchanged. That is inflation and taxes have exactly nullified the return from the financial instrument.
  • Intuitively, it is clear that because of the nature of taxation (as per slab), the real post-tax return from these inflation indexed bonds will be quite low.
  • The above post-tax return is valid if tax is paid as per slab each financial year.
  • If tax is paid as per slab upon maturity, the formula is (thanks to Ronnie Joshua Reuben for pointing out an error)

post-tax-return =[(1+return)^duration x (1-tax)]^(1/duration) -1

Here is a real returns calculator with which you can access the effectiveness of a financial instrument in protecting the purchasing power of a lumpsum from inflation. Both types of post-tax return computation are included.

Download the Real Returns Calculator – RBI Inflation Linked Bonds


  • The calculator can be used for any financial instrument. Set the base interest rate (1.5%) to zero. This is applicable only for  inflation-indexed bonds.
  • Ruppee symbol courtesy: Wiki Commons. The arrow is my handiwork
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9 comments on “Real Returns Calculator

  1. Ashal jauhari says:

    Dear Pattu, an important post just in time. Not many people give a thought to real return after Inflation and taxation.



  2. AyushP306 says:

    Real Returns Calculator is amazing ! Really liked it .. : )

  3. Udaya Chandran says:

    Thanks for the calculator. I’d like to share this calculator on my blog I’d like to have your permission for this. Please let me know your consent.

  4. Udaya Chandran says:


  5. Ronnie Joshua Reuben says:

    Sir can you help me understand the POST TAX RETURN on MATURITY FORMULA, i see that it is some what similar to the effective rate of interest formula but (+ tax term) I fail to understand. If you can hint me towards the source then i will surely look into that. Thanks!!

    • pattu says:

      Hi Ronnie, you are correct about the + tax term. It is wrong. I have corrected the equation and the excel file. Thank you so much. Here is the math for those interested.

      maturity =investment x (1+return)^duration
      maturity(post-tax) = (investment x (1+return)^duration) x (1-tax)
      maturity(post-tax)= investment x (1+post-tax-return)^duration
      investment x (1+post-tax-return)^duration =(investment x (1+return)^duration) x (1-tax)
      (1+post-tax-return)^duration =(1+return)^duration x (1-tax)
      post-tax-return =[(1+return)^duration x (1-tax)]^(1/duration) -1

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