What is a good return rate for 2026?

To beat both inflation (long-term ~6%) and taxation, you should target a return of at least 10-12%. This is typically achievable through a diversified portfolio of Equity Mutual Funds and Gold.

Why is my FD return negative?

Nominally, your FD is positive (e.g., 7%). But if you are in the 30% tax bracket, your post-tax return is ~4.9%. If inflation is 6%, your real purchasing power drops by 1.1% every year. Even with low 2026 CPI (~2.4%), long-term erosion persists.

Does this apply to Senior Citizens?

Senior citizens get slightly higher rates (7.5-8.2%) and some tax relief (Section 80TTB), so the impact is less severe. However, medical inflation (11-14%) still poses a significant risk to their corpus.

What is India's current inflation rate in February 2026?

Headline CPI stands around 2.4% (January 2026), reflecting temporary disinflation. Long-term planning should use conservative 6% estimates.

How do equity mutual funds compare for real returns?

Historical long-term equity returns ~12-15% deliver positive real growth (~6-9% after inflation/tax), outperforming FDs significantly over 10+ years.

Should I worry about low inflation in 2026?

Short-term relief from ~2.4% CPI is welcome, but lifestyle costs (medical/education) rise faster. Plan with higher long-term assumptions to avoid shortfalls.

Why 7% Returns Are Not Enough in 2026 (After Inflation & Tax)

Who this is for: Conservative investors relying on Fixed Deposits, savings accounts, or traditional plans who want to understand if their wealth is truly growing.

Updated February 2026 with current FD rates (~6.5-7%), low CPI (~2.4%), tax rules, and long-term inflation insights.

For generations, 7% returns from Fixed Deposits symbolised safe, reliable growth. But in 2026, even with low headline inflation (~2.4%), traditional "safe" investments often deliver negative real returns after tax—silently eroding wealth.

India's long-term inflation averages ~6%, while taxes reduce yields further. This guide, updated February 2026, breaks down the math, compares options, and shows how to target genuine growth.

1. The Illusion of Safety

Many investors prioritise capital protection and visible returns, viewing FDs as risk-free. Yet "safety" ignores inflation and tax—the real threats to wealth preservation.

Nominal 7% looks attractive, but purchasing power determines lifestyle. Rising costs (groceries, healthcare, education) outpace low yields, especially with medical inflation at 11-14%.

In February 2026, major banks offer 6.5-7% on FDs—down slightly amid low CPI. Post-tax (30% bracket + cess), yields drop to ~4.6-4.9%, below long-term inflation.

Risk Factors:

Reinvestment risk at lower rates.
Opportunity cost vs growth assets.
Lifestyle inflation amplifying erosion.

Pro Tip: Safety in capital ≠ safety in purchasing power. Diversify beyond debt for long-term goals.

Calculate Your Real Return

Strip away tax and inflation to reveal true portfolio growth.

Open Real Return Calculator

2. Nominal vs Real Returns Explained

Nominal return is the stated percentage. Real return adjusts for inflation, showing actual wealth increase.

Formula: Real Return ≈ Nominal - Inflation (approximate; precise uses compounding).

Example: 7% nominal at 6% inflation = ~1% real pre-tax; post-tax negative.

Taxes compound the issue—FD interest taxed at slab rates (up to 30% + cess), unlike equity LTCG (12.5% above ₹1.25 lakh).

Comparative Insights:

Cash/Savings: ~3-4% nominal → Strongly negative real.
FDs: Marginal at best.
Equity: Historical 12-15% → Positive real.

Pro Tip: Always evaluate post-tax, post-inflation returns for accurate planning.

3. The Silent Loss Calculation (2026 Update)

Using February 2026 rates for a ₹1 Lakh FD at 7% (30% tax bracket):

Component	Amount / Rate
Principal	₹1,00,000
Interest (7%)	+ ₹7,000
Tax (~31% incl cess)	- ₹2,170
Net	₹1,04,830
Long-Term Inflation (6%)	- ₹6,000 purchasing power
Real Outcome	-1.17% Loss

Even at current ~2.4% CPI, future normalisation creates risk.

Mini Case Study: ₹50 lakh corpus at 7% FD loses ~₹58,500 real value annually.

Check Your Tax Liability

See how equity taxation favours long-term growth.

Open Investment Tax Calculator

4. Current Low Inflation Trends (February 2026)

January 2026 CPI ~2.4% (new 2024-base), continuing disinflation from food stability and global trends.

RBI targets 4%; long-term average ~6% since 2000.

Core ~3-4%.
Medical ~11-14%.
Education often higher.

Risks: Temporary low rates mask future spikes from shocks.

Pro Tip: Use 6% for goals >5 years; higher for healthcare/education.

Forecast future costs with our Inflation Calculator.

5. FD vs Equity Mutual Funds: Real Returns Comparison

Equity historical long-term ~12-15% vs FD ~6.5-7%.

Parameter	FD	Equity MF
Nominal	~7%	~12-15%
Post-Tax	~4.9%	~10.5-13%
Real (6% inflation)	-1.1%	+4.5-7%

Equity volatility rewards patience.

Mini Case Study: ₹10 lakh over 20 years: FD ~₹3.8 lakh real; Equity ~₹12+ lakh real.

6. Special Considerations for Senior Citizens

Seniors get 0.5% extra (~7.5-8.2%) and ₹50,000 interest deduction (80TTB).

Post-tax yields improve, but medical inflation (11-14%) threatens corpus faster.

Pro Tip: Balance higher FDs with equity/gold for growth.

7. What Returns Are Truly "Enough"?

Target 10-12% nominal for ~4-6% real growth.

Emergency: FDs.
Growth: Equity SIPs.
Hedge: Gold/SGBs.

Pro Tip: Step-up SIPs annually.

Plan Your Growth

See 12% vs 7% difference.

Open SIP Calculator

8. Conclusion: Building Wealth That Lasts

Low 2026 inflation provides breathing room, but long-term threats persist. Shift to growth assets for positive real returns.

Key Takeaways:

Focus on real, post-tax returns.
Diversify beyond debt.
Plan conservatively.

Next Steps:

Calculate real returns.
Start/step-up equity SIPs.
Review annually.