The short answer: The FD rate of return on a one-year deposit ranged from 5.10% to 9.12% a year before tax between 2011 and 2024, and from 3.57% to 6.39% after tax at the 30% slab. Put ₹1 lakh in a one-year fixed deposit every April from 2011 to 2024, rolling the proceeds forward to April 2025, and it becomes ₹2.62 lakh before tax and ₹1.98 lakh after tax at the 30% slab. Consumer prices rose 2.11 times over the same years, so ₹1.98 lakh buys what ₹0.94 lakh bought in 2011. The real return, after tax and inflation, was -0.45% a year.
Investor note, October 2026. Written and reviewed by the Krishna Vriddhi Capital research desk. Updated 23 October 2026. 4 minute read.
| Item | Detail |
|---|---|
| Period | Deposits made April 2011 to April 2024, 14 years in all, rolled forward to April 2025 |
| Rates | RBI Handbook of Statistics 2025-26, Table 59: one-to-three-year term deposit rates at five major banks, midpoint of the range |
| Inflation | CPI all-India general index (combined), Table 34 of the same Handbook |
| Tax | Interest taxed every year at the depositor’s slab; 30% is the base case; cess ignored |
Key takeaways
- The average FD rate of return over the 14 years was about 7.1% a year before tax and about 5.0% a year after 30% tax. We computed both from the ₹2.62 lakh and ₹1.98 lakh endings.
- In the FD vs inflation race, the deposit lost ground to prices after tax in 8 of the 14 years.
- Only a depositor who paid no tax on interest ended clearly ahead of prices. Your slab decides the outcome.
What is the FD rate of return, in plain words?
The FD rate of return is the interest a bank pays on a fixed deposit, as a percentage a year. It is not the whole story. Interest is added to your income and taxed at your slab rate, and prices rise every year. The return after both of those, called the real return, is what tells you whether your money can buy more than before.
FD rate of return by year: the rate, the tax and the inflation
Rates are the midpoint of the range at five major banks at the end of March, applied to a deposit made the following April.
| Deposit made | Rate before tax | Rate after 30% tax | Inflation that year | Real return after tax |
|---|---|---|---|---|
| Apr 2011 | 8.62% | 6.04% | 9.9% | -3.5% |
| Apr 2012 | 9.12% | 6.39% | 9.5% | -2.8% |
| Apr 2013 | 8.88% | 6.21% | 6.0% | +0.2% |
| Apr 2015 | 8.62% | 6.04% | 4.5% | +1.5% |
| Apr 2018 | 6.58% | 4.60% | 4.8% | -0.2% |
| Apr 2021 | 5.10% | 3.57% | 6.7% | -2.9% |
| Apr 2023 | 5.45% | 3.81% | 4.6% | -0.8% |
| Apr 2024 | 6.88% | 4.81% | 2.0% | +2.7% |
Positive real years cluster in 2013 to 2017, when rates held near 9% while inflation cooled. After 2018 the after-tax rate never clearly beat inflation again until the latest year, when deposit rates had risen back near 7% and inflation fell to about 2%. The PDF has the rate ranges behind each midpoint.
FD vs inflation by tax slab: who kept up?
| Tax slab on interest | Final value of ₹1 lakh | In 2011 rupees | Real return per year |
|---|---|---|---|
| 0% (no tax) | ₹2.62 lakh | ₹1.25 lakh | +1.58% |
| 10% | ₹2.39 lakh | ₹1.13 lakh | +0.90% |
| 20% | ₹2.17 lakh | ₹1.03 lakh | +0.23% |
| 30% | ₹1.98 lakh | ₹0.94 lakh | -0.45% |
Prices rose 2.106 times between FY 2011-12 and FY 2025-26. Real return is after-tax growth divided by price growth, minus one.
Can FD beat inflation?
Before tax, mostly yes: the pre-tax rate cleared inflation in 10 of 14 years, which is why statements feel fine. After 30% tax it cleared inflation in only 6. The fixed deposit does exactly what it promises in nominal terms: the passbook number never falls. What it cannot promise is that the number keeps its meaning.
What this does and does not say
This note measures one instrument over one period with published rates. It does not compare it with any mutual fund, and it is not a forecast of future rates or inflation. For how fixed deposits and mutual funds differ, see our guide to mutual funds vs fixed deposits.
Illustrative only: it uses an assumed ₹1 lakh, the midpoint deposit rate each year and an assumed tax slab, as shown, and it is not a forecast of future rates or inflation. The FY 2025-26 CPI average is published on a new base and is restated on the old base with the official linking factor, so the series is unbroken.
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Keep it, forward it, or print it. It is sent to your inbox straight away and has the full 14-year table with the rate ranges, the chart of ₹1 lakh against the price of the same basket, the rate-versus-inflation chart and the slab table.
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Questions people ask
What is a good FD rate of return?
This note does not rate any rate as good. Between 2011 and 2024 the one-year FD rate of return ranged from 5.10% to 9.12% before tax. What matters is the rate after tax compared with inflation: after 30% tax it was above inflation in only 6 of 14 years.
What is the average FD rate of return?
About 7.1% a year before tax and 5.0% a year after 30% tax over the 14 years, computed from ₹1 lakh growing to ₹2.62 lakh and ₹1.98 lakh. Rates at any bank today may differ; check the bank’s own rate card.
Is FD interest taxable?
Yes. Interest is added to your income and taxed at your slab rate each year, even if the deposit has not matured. This note uses the slab rates in the table; tax rules change, so confirm your own position with a tax professional.
Can FD beat inflation?
Before tax, in 10 of the 14 years. After tax at the 30% slab, in 6. At the 0% slab the real return was +1.58% a year; at 30% it was -0.45%.
What is a real return?
The real return is the return after inflation. If a deposit grows 6% after tax while prices rise 6%, the real return is about zero: the amount is larger but buys the same.
How much will ₹1 lakh become in an FD?
In this note’s 14-year rolling case, ₹2.62 lakh before tax and ₹1.98 lakh after 30% tax. It is a historical illustration at the rates then prevailing, not a forecast.
Does FD vs inflation mean a fixed deposit is a bad choice?
No. A deposit offers a known amount at a known date. This note only measures what that amount could buy, over one 14-year period. Whether it suits you depends on your goal and time horizon.
Sources
Reserve Bank of India, Handbook of Statistics on the Indian Economy 2025-26, Table 59 (term deposit rates) and Table 34 (CPI combined, base 2012), on rbi.org.in, opened 23 October 2026. The FY 2025-26 CPI average is restated on base 2012 with MOSPI’s linking factor (0.5267, first CPI 2024 press release, 12 February 2026). Tax slabs: Income Tax Department. Calculations by the Krishna Vriddhi Capital research desk.
Investor education only. Tax rules change; this note is general information, not tax advice. Not investment advice or a recommendation of any scheme. More notes are in the research library.