1 Jul 2026 evening

A friend called his new fixed deposit the safe part of his portfolio. 6.5 percent, locked for a year, done. He was pleased with himself.

I asked him one question. What does it earn after tax and after inflation.

Here is the part the poster never shows you. A return has three numbers, and only the last one is real.

The 6.5 percent is the sticker. Nominal, pre-tax, the loudest number in personal finance. His slab takes 30 percent of the interest every year, and it is taxed whether he touches it or not. That leaves 4.55. Then inflation, running near 4 percent right now, takes its cut of what those rupees can actually buy. What is left, the real return, is about 0.6 percent.

The 6.5 was never the return. It was the headline.

And that is at today's benign inflation. Push it to the 6 percent ceiling the RBI itself tolerates and the same top-slab FD turns real-negative, around minus 1.4 percent. It keeps every rupee and quietly buys less each year. At 4 percent inflation, prices double in roughly 18 years. Rs 100 now is Rs 50 of the same shopping by then.

None of this makes a fixed deposit bad. It makes nominal a lie you tell yourself. Capital protection measured in rupees can be capital erosion measured in purchasing power.

Two things worth carrying. How a return is taxed is part of the return: FD interest is taxed at your slab every year, equity is taxed lighter and only when you sell, so two rates that look equal on the shelf are not equal in your hand. And safe is a real-terms question: a number that cannot clear inflation is not protecting your money, it is watching it shrink in slow motion.

The fixed deposit did not lose a rupee. It just stood still while the price of everything walked past it.

How real return, tax and inflation decide what your money keeps: