worldofcalcsCompound Interest Calculator 💰
What is compound interest?
Compound interest is interest earned on your original money and on the interest it has already earned. Each period's interest is added to the balance, so the next period's interest is calculated on a bigger amount. The longer the money stays invested and the more often interest is added, the faster it grows. Bank fixed deposits in India usually compound quarterly.
Compound interest formula
A = P × (1 + r ÷ n)^(n × t)
A is the final amount, P the principal, r the annual rate as a decimal, n the number of times interest is added each year (1 yearly, 4 quarterly, 12 monthly) and t the number of years. Compound interest = A − P. Simple interest, by contrast, is P × r × t, earned only on the original amount.
Making compounding work for you
- Time matters most: the same ₹1 lakh at 8% grows to about ₹2.2 lakh in 10 years but ₹10.8 lakh in 30, because later years compound a much bigger balance.
- The rule of 72: divide 72 by the annual rate to estimate how many years money takes to double. At 8%, about 9 years.
- More frequent compounding helps, but only a little: monthly instead of yearly adds about 0.3% a year at 8%.
- Inflation compounds too. At 6% inflation, prices double in about 12 years, so compare returns after inflation.
- Debt compounds against you: credit card balances at 3–4% a month can double in about two years.
- Tax reduces compounding: FD interest is taxed every year, while gains on PPF or long-held equity funds compound with less or no tax.
Worked example: ₹1 lakh at 8%
- ₹1,00,000 at 8% a year, compounded quarterly, for 10 years
- A = 1,00,000 × (1 + 0.08 ÷ 4)^(4 × 10) = 1,00,000 × 1.02⁴⁰ = ₹2,20,804
- Interest earned: ₹1,20,804. Simple interest at 8% would give only ₹1,80,000 in total
- Compounded yearly instead, it grows to ₹2,15,892; monthly, to ₹2,21,964
- Left for 20 years it reaches ₹4,87,544, and for 30 years ₹10,76,516
₹1 lakh with compound interest
Compounded quarterly.
| Annual rate | 5 years | 10 years | 20 years |
|---|---|---|---|
| 6% | ₹1,34,686 | ₹1,81,402 | ₹3,29,066 |
| 7% | ₹1,41,478 | ₹2,00,160 | ₹4,00,639 |
| 8% | ₹1,48,595 | ₹2,20,804 | ₹4,87,544 |
| 10% | ₹1,63,862 | ₹2,68,506 | ₹7,20,957 |
| 12% | ₹1,80,611 | ₹3,26,204 | ₹10,64,089 |
Before tax and inflation.