Compound Interest Calculator
Find out how much your investment grows when interest earns interest.
What is compound interest?
Compound interest is interest earned not only on your original investment (the principal) but also on the interest that has already accumulated. This is often called "interest on interest", and it is the single most powerful force behind long-term wealth creation. Each time interest is added to your balance, that larger balance becomes the base for the next round of interest — so growth accelerates the longer you stay invested.
The formula this calculator uses is:
A = P × (1 + (r/100)/n)^(n × t)
A— the maturity amountP— the principal you investr— the annual interest rate in percentn— the number of times interest compounds per yeart— the number of years
Reading it from the inside out: r/100 converts the rate to a decimal, dividing by n gives the rate for a single compounding period, and raising the bracket to the power n × t applies that growth once for every period across the whole term. Subtract the principal from A and what remains is the total interest earned.
How compounding frequency changes your returns
The more often interest compounds, the more you earn. Monthly compounding grows your money slightly faster than quarterly, which in turn beats half-yearly and yearly. The difference is small over one year but becomes meaningful over decades. Most bank fixed deposits in India compound quarterly — you can see this in action with our FD Calculator.
The table below takes the same ₹1,00,000 at 10% p.a. for 10 years and changes only how often the interest compounds:
| Compounding | Times per year (n) | Maturity amount | Interest earned |
|---|---|---|---|
| Yearly | 1 | ₹2,59,374 | ₹1,59,374 |
| Half-yearly | 2 | ₹2,65,330 | ₹1,65,330 |
| Quarterly | 4 | ₹2,68,506 | ₹1,68,506 |
| Monthly | 12 | ₹2,70,704 | ₹1,70,704 |
A worked example
Suppose you place ₹5,00,000 in a fixed deposit at 7% p.a. compounded quarterly for 5 years. Here n = 4, so the rate per quarter is 7% ÷ 4 = 1.75%, applied over 4 × 5 = 20 quarters. The maturity value works out to roughly ₹7,07,389, of which about ₹2,07,389 is interest. A recurring deposit applies the same idea to each monthly instalment — try our RD Calculator for that pattern.
Compound vs simple interest
With simple interest you earn a fixed amount every year based only on the principal. With compound interest, each year's interest is added to the balance and earns interest itself. Over a single year the two are identical; the gap widens dramatically the longer you stay invested. Compare them side by side with our Simple Interest Calculator.
Here is ₹1,00,000 at 10% p.a., simple interest versus annual compounding:
| Years | Simple interest maturity | Compound maturity | Extra from compounding |
|---|---|---|---|
| 1 | ₹1,10,000 | ₹1,10,000 | ₹0 |
| 5 | ₹1,50,000 | ₹1,61,051 | ₹11,051 |
| 10 | ₹2,00,000 | ₹2,59,374 | ₹59,374 |
| 20 | ₹3,00,000 | ₹6,72,750 | ₹3,72,750 |
| 30 | ₹4,00,000 | ₹17,44,940 | ₹13,44,940 |
After 30 years, compounding delivers over ₹13 lakh more than simple interest on the very same deposit — the clearest illustration of why time in the market matters more than trying to time it.
Why starting early beats investing more
Consider two investors who each earn 10% compounded annually. Priya invests ₹1,00,000 at age 25 and leaves it untouched; Rahul invests the same ₹1,00,000 but starts at age 35. By the time both turn 55, Priya's money has compounded for 30 years to about ₹17,44,940, while Rahul's has grown for only 20 years to about ₹6,72,750. Same amount, same rate — a ten-year head start alone is worth over ₹10 lakh. That is why a modest sum invested early usually beats a larger sum invested late.
The Rule of 72
The Rule of 72 is a quick mental shortcut for compound growth: divide 72 by your annual return to estimate how many years it takes your money to double. It is an approximation, but it stays remarkably close for rates between about 6% and 12%.
| Annual return | 72 ÷ rate (years) | Actual doubling time |
|---|---|---|
| 6% | 12.0 | ~11.9 years |
| 8% | 9.0 | ~9.0 years |
| 10% | 7.2 | ~7.3 years |
| 12% | 6.0 | ~6.1 years |
So an investment earning around 8% doubles in roughly nine years, while one earning 12% doubles in about six. The rule works because doubling depends on repeated compounding rather than simple multiplication. To work backwards from an investment's actual start and end values, use our CAGR Calculator.
Where different compounding frequencies show up
In practice the compounding frequency is fixed by the product, not by you. Knowing the norm helps you compare offers on a like-for-like basis:
| Instrument | Typical compounding |
|---|---|
| Bank fixed deposits | Quarterly |
| Recurring deposits | Quarterly |
| Savings account interest | Calculated on daily balance, usually paid quarterly |
| Public Provident Fund (PPF) | Annually |
| Government bonds and most NCDs | Half-yearly or annually |
Two deposits quoting the same rate can mature at different amounts if one compounds quarterly and the other annually, so always check the compounding basis before comparing. Tax-free instruments such as PPF compound only once a year yet remain powerful because nothing is deducted along the way — see our PPF Calculator.
Tips to make compounding work harder
- Start as early as possible — time is the biggest multiplier.
- Reinvest returns instead of withdrawing them.
- Choose instruments with more frequent compounding when returns are equal.
- Stay invested through market cycles to let the effect build.