Compound Interest
Calculator
How your money grows when interest earns interest — at any rate, tenure and compounding frequency.
Your deposit
Maturity
Assumes a fixed rate for the full tenure.
What is compound interest?
Compound interest is interest calculated on both your original principal and on all the interest you have already earned. Unlike simple interest — which grows only on the initial amount — compound interest snowballs: every time it compounds, the new interest is added to the base for the next period. Over time this produces exponential growth, which is why long-term investors consistently prefer compound-interest products over simple-interest alternatives.
The compound interest formula
The standard formula is:
A = P × (1 + r/n)^(n × t)
- A — Total amount (principal + interest earned)
- P — Principal (your initial investment)
- r — Annual interest rate as a decimal (so 8% becomes 0.08)
- n — Number of times interest compounds per year (12 for monthly, 4 for quarterly, 1 for yearly)
- t — Investment tenure in years
Total interest earned = A − P
How to use this calculator
- Enter your principal — the lump sum you are investing or depositing.
- Set the annual interest rate using the slider or type it directly.
- Enter your investment tenure in years.
- Select the compounding frequency: yearly, half-yearly, quarterly, or monthly.
- The result panel updates instantly with your maturity value, total interest earned, and how much the interest is as a percentage of your principal.
Why compounding frequency matters
The more frequently your investment compounds, the higher your total return — even at the same annual rate. Each compounding event adds interest to the growing base, which then earns interest itself in the next period.
- Monthly compounding (typical for bank FDs and savings accounts) produces noticeably higher returns than quarterly or yearly compounding.
- Annual compounding gives the lowest returns among the standard frequencies.
- Example: ₹10,000 at 10% for 1 year — annual compounding gives ₹11,000 while quarterly gives ₹11,038. The difference widens substantially at longer tenures and higher principal amounts.
Compound interest vs simple interest
With simple interest, you earn a fixed amount of interest each year based solely on the original principal — growth is linear. With compound interest, the interest from each period is added to the base, so the next period's interest is calculated on a larger number. The longer the tenure, the more dramatic the difference. A ₹1 lakh deposit at 10% p.a. for 20 years earns ₹2 lakh in simple interest but ₹5.73 lakh in compound interest (monthly). That 2.7× gap is compounding at work.
Worked examples — Indian context
- Bank FD: ₹2,00,000 at 7% p.a. quarterly compounding for 3 years. A = 2,00,000 × (1.0175)^12 = ₹2,46,027. Interest earned = ₹46,027.
- Corporate FD: ₹50,000 at 8.5% p.a. monthly compounding for 5 years. A = 50,000 × (1 + 0.085/12)^60 = ₹75,653. Interest earned = ₹25,653.
- PPF (annual compounding): ₹1,50,000 at 7.1% p.a. yearly compounding for 15 years. A = 1,50,000 × (1.071)^15 = ₹4,15,380. Interest earned = ₹2,65,380.
- Lumpsum equity fund estimate: ₹5,00,000 at 12% p.a. annual compounding for 10 years. A = 5,00,000 × (1.12)^10 = ₹15,52,924. This is an indicative estimate; equity returns are market-linked and not guaranteed.
Where compound interest works for you in India
- Fixed Deposits (FDs) — Most banks compound FD interest quarterly. The effective annual yield (EAY) will be slightly higher than the stated rate. Always compare EAY across banks, not just the headline rate.
- Recurring Deposits (RDs) — Monthly contributions compounded quarterly. Use the RD calculator for exact maturity figures on periodic deposits.
- Public Provident Fund (PPF) — Compounded annually at a government-set rate (7.1% for FY2025-26). The 15-year lock-in magnifies the compounding effect significantly.
- National Savings Certificate (NSC) — Interest compounds annually but is paid at maturity. Useful for conservative investors in the 30% tax bracket who can offset interest as deemed reinvestment.
- National Pension System (NPS) — Market-linked growth that also benefits from compounding across equity and debt allocations over a long accumulation phase.
- Equity and Debt Mutual Funds — No stated interest rate, but NAV appreciation compounds over time as returns are reinvested (growth option). Historically Nifty 50 has delivered roughly 12-13% CAGR over 15-year rolling periods.
- Savings Accounts — The most accessible compound-interest product; typically compounded quarterly or monthly on the daily balance.
Frequently asked questions
Is compound interest easy to calculate without a calculator?
The formula is manageable for annual compounding, but monthly or daily compounding requires raising a number to a large exponent — tedious and error-prone by hand. This calculator handles it instantly regardless of frequency.
How does compounding frequency affect my returns?
Higher frequency means interest is added to your principal more often, so you earn interest on a larger base sooner. For the same ₹10,000 at 10% for 1 year: annual gives ₹11,000, quarterly ₹11,038, monthly ₹11,047. The gap widens substantially at higher amounts and longer tenures — at ₹10 lakh over 20 years, the difference between annual and monthly compounding at 10% is over ₹3 lakh.
What is the difference between daily, monthly, quarterly, and yearly compounding?
The difference is how often interest is calculated and added to your principal. Daily means 365 compounding events per year (highest effective rate); monthly means 12; quarterly means 4; annually means once. More frequent compounding means you earn interest on your interest sooner, which produces a higher maturity value even at the same nominal rate.
Why is compound interest described as so powerful?
Because it earns returns on returns. Once interest is added to your principal, it starts earning interest itself in the next period. Over long periods this creates exponential growth — a small difference in tenure or rate produces dramatically different outcomes. A ₹1 lakh investment at 10% monthly compounding grows to ₹2.7 lakh in 10 years and ₹7.3 lakh in 20 years — nearly 3x more in the second decade alone. Starting early matters far more than investing larger amounts later.
Which investment options offer compound interest in India?
Fixed deposits and recurring deposits (banks compound quarterly by default), PPF (compounded annually), NSC (compounded annually, paid at maturity), NPS (market-linked compounding), equity and debt mutual funds (NAV-based growth), and savings accounts (compounded quarterly or monthly). Always verify the compounding frequency in the product's term sheet — it directly affects your maturity amount.
Can I use this calculator for mutual fund projections?
Yes, as a rough estimate. Enter your lump-sum amount, set an expected annual return rate (e.g., 10-12% for diversified equity funds based on historical Nifty 50 CAGR), choose annual or monthly compounding, and set the tenure. Keep in mind that mutual fund returns are market-linked and will vary year to year — the calculator gives a direction-of-travel estimate, not a guaranteed figure. For systematic investments, use our SIP calculator instead.
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