Inflation is the return you never see

Every projection on this site — and everywhere else — reports a number in future rupees. Future rupees buy less. That gap is where a great deal of careful financial planning quietly goes wrong.

What a crore is worth later

At 6% inflation, ₹1,00,00,000 at maturity buys what this much buys today:

Maturity in	Worth today
10 years	₹55,83,948
20 years	₹31,18,047
30 years	₹17,41,101

Hitting a ₹1 crore target in thirty years delivers, in today's terms, about ₹17.4 lakh of purchasing power. The target was never really a crore.

This is not an argument against saving. It is an argument against picking a round number as a goal without asking what it will buy.

The uncomfortable bit: safe can mean losing

Take a fixed deposit at 7%. In the 30% tax bracket, interest is taxed every year at your slab, so you keep:

7% × (1 − 0.30) = 4.90%

Against 6% inflation, the real return is:

4.90% − 6% = −1.10% a year

The balance rises. The purchasing power falls. You are, in a precise and unglamorous sense, paying about 1.1% a year for certainty.

That is a legitimate thing to buy. Certainty has real value — for an emergency fund, for money you need next year, for money you cannot afford to see fall. But it should be a decision, not an accident. Many people hold long-horizon money in deposits believing they are being prudent, and are in fact guaranteeing a slow loss.

Why tax-free schemes look different

This is where PPF and Sukanya Samriddhi change the arithmetic. Both are EEE — the interest and the maturity amount are tax-free — so the headline rate is the rate you keep. A 7.1% PPF is genuinely 7.1%, not 4.97%, and that is the correct comparison against a taxable 7% deposit.

Whether the 15-year lock-in is acceptable is a separate question. But the post-tax comparison is not close.

Planning in today's money instead

A more useful way round: decide what you want in today's rupees, then inflate it.

Say you want the equivalent of ₹40 lakh in fifteen years. At 12% assumed returns, reaching ₹1 crore in fifteen years needs about ₹19,819 a month — and that ₹1 crore is worth ₹41,72,651 in today's money. So roughly ₹20,000 a month buys you today's ₹40 lakh, fifteen years out.

Over twenty years, ₹1 crore needs only about ₹10,009 a month — but it is worth just ₹31,18,047 in today's terms. Same target, longer runway, less purchasing power at the end.

Both calculations are in the SIP calculator, and every calculator on the site has a "show what it is worth in today's money" toggle for exactly this reason.

Three practical conclusions

Judge returns after tax and after inflation. A nominal rate on its own tells you very little. The real, post-tax return is the only one that changes what you can buy.

Match the instrument to the horizon. Money needed within a few years belongs somewhere safe, and accepting a slightly negative real return on it is a sensible price for certainty. Money needed in twenty years, held in a deposit, is a much harder position to defend.

Set goals in today's rupees. "₹40 lakh in today's money" survives contact with reality. "₹1 crore" does not tell you what it buys.

General information about how inflation and taxation affect returns, not financial advice. Inflation and tax rules both change, and your own tax position may differ. For a decision of any size, speak to a SEBI-registered investment adviser or a qualified chartered accountant.