Finance
Compound Interest Calculator
Compound interest pays interest on your interest. Enter an amount, a rate, a time period and how often interest is compounded to see what it grows to, along with a year-by-year balance.
How to use this calculator
- Enter the amount you are investing or depositing today.
- Enter the annual interest rate.
- Enter the time period in years; decimals such as 2.5 are allowed.
- Choose how often the interest is compounded. Quarterly is typical for Indian fixed deposits, monthly for many savings products.
Formula
A = P × (1 + r/n)^(n × t)
- A
- final amount, principal plus interest
- P
- principal, the starting amount
- r
- annual interest rate as a decimal, so 8% is 0.08
- n
- number of times interest is compounded per year
- t
- time in years
Compound interest earned is A − P.
Worked example
₹1,00,000 invested for 10 years at 8% a year, compounded quarterly.
- Rate per period0.08 ÷ 4 = 0.02
- Number of periods4 × 10 = 40
- Final amount1,00,000 × 1.02⁴⁰
The balance grows to about ₹2,20,804, meaning roughly ₹1,20,804 of compound interest.
Simple interest versus compound interest
Simple interest is calculated only on the original amount, so it grows in a straight line. Compound interest is calculated on the original amount plus all the interest added so far, so it grows as a curve that steepens over time.
Over one year at the same rate the difference is small. Over twenty years it is dramatic, which is why compounding matters far more to long-term savings than to short-term deposits.
Why compounding frequency matters
The more often interest is added to the balance, the sooner it starts earning interest itself. At the same nominal rate, monthly compounding produces slightly more than quarterly, which produces slightly more than annually. The gap widens with higher rates and longer periods.
This is why the effective annual rate can be higher than the quoted rate. A deposit quoted at 8% compounded quarterly actually returns about 8.24% over a year.
Things to keep in mind
- Interest on most deposits is taxable in the year it is earned, which reduces the amount that actually compounds.
- Inflation reduces what the final amount can buy. A return of 8% with inflation at 6% is closer to 2% in real terms.
Frequently asked questions
What is the rule of 72?
It is a shortcut for estimating how long money takes to double: divide 72 by the annual rate. At 8% a year, money roughly doubles in nine years. It is an approximation that works best for rates between about 6% and 10%.
Which compounding frequency should I choose?
Use the frequency your bank or product actually applies. Indian fixed deposits usually compound quarterly, recurring deposits quarterly, and many savings accounts calculate daily but credit quarterly. If you are not sure, quarterly is a reasonable default for deposits.
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