Compound Interest Calculator
See how your money grows with the power of compounding.
Updates as you type.
What is Compound Interest
Compound interest is the interest you earn not just on your original investment, but also on the interest already added to it. In other words, your money earns interest, and then that interest earns interest too. This snowball effect is why compound interest is often called the eighth wonder of the world and is the engine behind long-term wealth creation through fixed deposits, mutual funds, PPF and other investments in India.
The key difference from simple interest is the compounding frequency. The more often interest is compounded, whether annually, half-yearly, quarterly, monthly or daily, the more your investment grows over the same period. A compound interest calculator instantly shows your maturity amount and total interest so you do not have to do the heavy maths by hand.
Compound Interest Formula
The standard compound interest formula is:
- A = P (1 + r/n)nt
Where each term means:
- A = final amount (maturity value)
- P = principal (initial investment)
- r = annual interest rate as a decimal (for example, 8% = 0.08)
- n = number of times interest is compounded per year
- t = time in years
Once you have A, the interest earned is simply:
- Compound Interest = A − P
Common values of n are: yearly = 1, half-yearly = 2, quarterly = 4, monthly = 12 and daily = 365. The rates used here are only examples, so verify the current interest rate offered by your bank or scheme before relying on the result.
Worked Example of Compound Interest
Suppose you invest ₹1,00,000 at an annual rate of 8%, compounded quarterly, for 5 years.
Here P = 1,00,000, r = 0.08, n = 4 and t = 5.
- A = 1,00,000 × (1 + 0.08/4)(4 × 5)
- A = 1,00,000 × (1 + 0.02)20
- A = 1,00,000 × (1.02)20
- A = 1,00,000 × 1.4859 = ₹1,48,595 (approx)
- Compound Interest = 1,48,595 − 1,00,000 = ₹48,595
If the same ₹1,00,000 had earned simple interest at 8% for 5 years, you would get only ₹40,000 in interest. The extra ₹8,595 comes purely from compounding. The table shows how compounding frequency changes the maturity value of ₹1,00,000 at 8% over 5 years.
| Compounding | n | Maturity (approx) |
| Yearly | 1 | ₹1,46,933 |
| Half-yearly | 2 | ₹1,48,024 |
| Quarterly | 4 | ₹1,48,595 |
| Monthly | 12 | ₹1,48,985 |
The Power of Compounding and Time
The single biggest driver of compound growth is time. The longer your money stays invested, the more dramatic the effect, because the interest base keeps getting larger each period. Starting to invest early, even with a small amount, often beats investing a larger amount later. This is why financial planners stress beginning your SIPs, PPF or fixed deposits as soon as possible. To make the most of compounding, stay invested for the long term, reinvest your returns instead of withdrawing them, and choose schemes with a higher compounding frequency where possible. Always confirm the actual rate, tenure and compounding terms with your provider before investing.
Frequently Asked Questions
The maturity amount is A = P(1 + r/n)^(nt), where P is principal, r is the annual rate as a decimal, n is the compounding frequency per year and t is the time in years. The interest earned equals A minus P.
Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus all previously accumulated interest. Over time, compound interest grows much faster than simple interest.
The more frequently interest is compounded, the higher the maturity value. For the same rate and tenure, monthly compounding earns slightly more than quarterly, which earns more than yearly compounding.
n is the number of times interest is compounded per year: 1 for yearly, 2 for half-yearly, 4 for quarterly, 12 for monthly and 365 for daily compounding.
Because your interest earns further interest, growth accelerates over time. The longer you stay invested, the larger the effect, which is why starting early can dramatically increase your final corpus.
Yes, most Indian fixed deposits, recurring deposits and schemes like PPF use compound interest, often compounded quarterly or annually. Always check the exact compounding terms with your bank as they affect your final returns.