FD vs. Debt Mutual Fund Calculator

What Formulas I had used to build this tool .

Inflation directly affects the real value of your money. 🔥
While investments like Fixed Deposits (FDs) and Debt Funds may seem to grow over time, their actual purchasing power depends on both taxation and inflation adjustment 📉.
Below are the essential formulas to help you calculate and compare.

1. Future Value (FV) Calculation

Formula:
FV = PV × (1 + r)n

• FV: Future Value (value of investment at maturity)
• PV: Present Value (initial investment)
• r: Annual interest rate (decimal form, e.g., 7% = 0.07)
• n: Number of years

This tells you how much your investment will grow before considering inflation or taxes.

2. Inflation Adjustment (Real Value)

Formula:
Real Value = Nominal Value ÷ (1 + i)n

• Real Value: Value in today’s purchasing power
• Nominal Value: Future Value in tomorrow’s money
• i: Annual inflation rate :I had use Current CII values i.e 363
• n: Number of years

This formula adjusts the future amount for inflation, showing what your investment is really worth today.

3. Tax Calculation for FD

Formula:
Tax = (FV - PV) × Tax Rate

Since FD interest is fully taxable, you pay tax on the entire interest earned at your income tax slab rate.

4. Tax Calculation for Debt Funds (Key Difference)

For investments ≤ 3 years:

Tax = (Gains) × Tax Rate
Gains are taxed at the income tax slab rate (similar to FDs).

For investments > 3 years (with Indexation Benefit):

• Indexed Cost: Original Cost × (CIIWithdrawal Year ÷ CIIPurchase Year)
• Taxable Gain: Redemption Value – Indexed Cost
• Tax: Taxable Gain × 20% (with indexation benefit)

The indexation benefit significantly reduces tax liability for long-term Debt Fund investments.

5. Real Return Calculation

Formula:
Real Return = [(1 + Nominal Return) ÷ (1 + Inflation Rate)] – 1

• Nominal Return: The return shown by your investment
• Inflation Rate: Annual inflation in decimal form

This gives you the actual growth of your money after accounting for inflation.

By applying these formulas, you can make smarter choices when comparing FDs and Debt Funds, especially in an inflationary economy.