Determine what a future amount of money is worth today. Essential for accounting for inflation.
This is how much "value" you lose to inflation over 10 years at 6%.
Present Value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. A rupee today is worth more than a rupee tomorrow because of its potential earning capacity or inflation.
The Time Value of Money (TVM) is the most fundamental concept in finance. It states that ₹100 today is worth more than ₹100 a year from now because you can invest today's money to earn interest. Our Present Value Calculator helps you "discount" future sums back to today's value, allowing you to make smarter decisions about loans, investments, and business projects.
PV = Present Value, FV = Future Value, r = Interest rate per period, n = Number of periods.
Discounting is the reverse of compounding. While compounding tells you how much your money will grow, Discounting tells you what a future payout is worth in today's terms. For example, if someone promises to give you ₹1 Lakh in 5 years, and you could earn 10% interest elsewhere, that promise is only worth about ₹62,000 today. If they ask you to pay more than ₹62,000 for that promise, it's a bad investment.
Your Discount Rate should represent your 'Next Best Alternative.' If you usually keep money in a Fixed Deposit at 7%, use 7%. If you are a business owner with a 15% return on capital, use 15%. This rate is also known as the 'Hurdle Rate'—if the Present Value of an investment's future returns is less than its cost today, the investment fails to meet your hurdle.
Insurance companies often offer 'Money Back' plans where they pay you a lumpsum after 15 years. Before signing up, use our PV Calculator to see what that 'Big Sum' is actually worth in today's purchasing power. You will often find that due to inflation and the time value of money, the 'Lakhs' promised in the future are worth significantly less than the premiums you pay today.
While the PV formula uses interest rates, you can also use it to estimate Inflation Impact. By using the inflation rate (e.g., 6%) as your discount rate, you can see how much a future goal (like a ₹50 Lakh child's education) is worth in today's 'perceived' value. This helps in setting realistic savings targets that don't fall short when the time comes to spend.
A business partner offers you ₹10 Lakhs in 3 years.
What will ₹1 Crore be worth in 20 years at 6% inflation?
Present Value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.
It's the principle that a sum of money is worth more now than the same sum will be at a future date due to its earning potential.
Formula: PV = FV / (1 + r)^n, where FV is Future Value, r is the discount rate, and n is the number of periods.
The discount rate is the interest rate used to pull future cash flows back to the present. It represents your 'Opportunity Cost'.
It helps you decide if a future payment (like an insurance payout or a business profit) is worth the investment you are making today.
Yes. High inflation reduces the purchasing power of future money, effectively requiring a higher discount rate to maintain value.
PV is the value of a single future sum. NPV (Net Present Value) is the sum of all future PVs minus the initial investment.
You can calculate how much you need to save today to have a specific 'inflation-adjusted' amount in 20 years.
Yes. A loan amount is essentially the Present Value of all the future EMIs you will pay to the bank.
As interest rates (discount rates) go up, the Present Value of future money goes down.