Compound Interest Calculator

Compound interest is interest earned on both the original principal AND the interest already accumulated. Each compounding period, the balance grows; the next period's interest is calculated on the new (bigger) balance. Over long horizons, this compounding effect is what makes long-term saving so much more powerful than simple interest.

A = P × (1 + r/n)^(nt), where A is the final amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the time in years. Example: ₹1,00,000 at 8% compounded quarterly for 10 years = 100000 × (1 + 0.08/4)^(4×10) = ₹2,20,804.

The more frequently interest compounds, the higher the effective return. At 10% nominal: annually compounded gives effective 10.00%, quarterly gives 10.38%, monthly gives 10.47%, daily gives 10.52%. The difference looks small per year but accumulates noticeably over decades. Continuous compounding (theoretical) caps at 10.52% in this example.

The nominal rate is the headline annual rate (e.g., "8% p.a.") regardless of compounding. The effective annual rate (EAR) is what you actually earn per year accounting for the compounding frequency. 8% nominal compounded monthly has an EAR of 8.30%. Banks usually advertise the nominal rate; FD calculators (and this one) show both — useful for comparing instruments with different compounding cadences.

Simple interest = P × r × t (interest only on principal, never on prior interest). Compound interest grows the balance exponentially. At ₹1,00,000 / 8% / 20 years: simple interest gives ₹2,60,000; compound interest (annual) gives ₹4,66,096. The longer the tenure, the more dramatic the gap — Einstein's alleged "eighth wonder of the world" line is about this gap, not the rate itself.

Bank FDs typically compound quarterly. PPF compounds annually. NSC compounds annually (but interest reinvests, so effectively semi-annually for cash flow purposes). EPF compounds annually. SSY compounds annually. Mutual fund returns aren't technically "compound interest" — they're NAV growth driven by underlying asset returns — but they're modelled identically for calculator purposes.

Depends on the instrument: bank FD interest is taxable at slab rate (with TDS at 10% above ₹40,000/yr for non-seniors). PPF and SSY interest is tax-free under §10(11) / §10(11A). EPF interest is tax-free below ₹2.5 lakh employee contribution per year. NSC interest is taxable but reinvested portions also qualify under §80C. POMIS interest is taxable. The calculator shows pre-tax compound growth — adjust for your slab when comparing instruments.

For most instruments: bank FDs lock the rate at booking; small-savings schemes (PPF, SSY, POMIS, SCSS, NSC) lock at deposit for that deposit's entire tenure but the rate that applies to future quarterly deposits resets quarterly per Government of India notification. Floating-rate bonds and corporate FDs may reset periodically. This calculator assumes a constant rate — model rate-change scenarios by running multiple calculations.

A back-of-envelope shortcut: divide 72 by the annual return % to estimate years to double your money. At 8% return: 72/8 = 9 years. At 12%: 72/12 = 6 years. It's an approximation derived from the compound growth math — accurate within ±5% for rates between 4% and 15%, where most savings/investment rates sit.

That's a different formula — recurring contributions are modelled by an annuity, not a single lump-sum compound. Use the SIP calculator for monthly contributions or the FD calculator for quarterly bank deposits. This calculator handles a one-time principal that compounds untouched — useful for FD lump-sums, NSC, single-tranche debt-fund investments, etc.