Compound Interest Calculator

What is compound interest?

Compound interest is interest earned on your original amount and on the interest already added to it. Each period, the interest joins the balance, so the next round of interest is calculated on a bigger number. Over time this 'interest on interest' makes your money grow faster and faster.

Simple interest, by contrast, is always calculated on the original amount only. The longer the period and the higher the rate, the bigger the gap between the two.

Compound interest formula

• A is the maturity amount, and A − P is the interest earned.
• P is the principal, the amount you start with.
• r is the yearly interest rate, written as a decimal (10% is 0.10).
• n is the number of times interest is compounded each year.
• t is the time in years.

For example, ₹1,00,000 at 10% a year compounded yearly for 5 years grows to ₹1,61,051. Simple interest over the same period would pay only ₹50,000, so compounding earns you an extra ₹11,051.

How compounding frequency changes the result

The more often interest is added, the more you earn, because each addition starts earning sooner. Here is ₹1,00,000 at 10% a year for 5 years:

Most bank fixed deposits in India compound quarterly, while savings accounts usually calculate interest daily and credit it every quarter. The calculator also shows the effective yearly rate, which lets you compare offers with different compounding.

Why starting early matters

Time is the biggest driver of compounding. At 10% a year, ₹1 lakh grows to about ₹2.6 lakh in 10 years but about ₹17.4 lakh in 30 years. Most of that growth comes in the later years, when the interest itself is earning interest.

That is why investing early, even small amounts, often beats investing larger amounts later.

When compounding works against you

• Credit cards charge interest on unpaid interest, often at 36% to 42% a year, so balances grow quickly. Pay the full bill every month if you can.
• Loan interest that is not paid on time is added to what you owe and starts attracting interest itself.
• Inflation compounds too: at 6% a year, prices roughly double in 12 years, which quietly reduces the value of money left idle.

Before you rely on the numbers

• The calculator assumes one fixed rate for the whole period. Rates on market-linked investments change.
• Tax on interest or gains is not included. Interest from deposits is usually taxed at your slab rate every year.
• Bank deposits may round interest or use slightly different day counts, so small differences from your bank's figures are normal.

Frequently asked questions