Compound Interest Calculator

Compound interest is interest earned on both your original principal and on the interest already accumulated. Because each period’s interest is added back to the balance, your money grows at an accelerating pace — often described as "interest on interest." It is the single most powerful force in long-term wealth building.

The more often interest is compounded, the more you earn, because interest starts earning its own interest sooner. At the same 8% rate, monthly compounding produces a slightly higher maturity value than quarterly, which beats half-yearly, which beats yearly. The gap is small at low rates but widens as the rate and tenure grow.

This calculator uses A = P × (1 + r/n)^(n×t), where P is the principal, r is the annual rate (as a decimal), n is the number of times interest compounds per year, and t is the number of years. The interest earned is simply A minus P.

Simple interest is calculated only on the original principal, so it grows in a straight line. Compound interest is calculated on the principal plus accumulated interest, so it grows exponentially. Over short periods the difference is minor, but over 10–20 years compound interest leaves simple interest far behind.

Most do. Fixed deposits typically compound quarterly, PPF compounds annually, savings accounts compound on the daily balance but pay quarterly, and recurring deposits compound quarterly. Equity mutual funds don’t pay "interest" but deliver compounding through reinvested growth in NAV over time.

The Rule of 72 is a quick mental shortcut: divide 72 by the annual interest rate to estimate how many years it takes your money to double. At 8% it takes about 9 years, at 12% about 6 years. It is an approximation that works best for rates between 6% and 15% and assumes annual compounding.

Interest on a fixed deposit is taxable on an accrual basis each year at your income tax slab rate, even though it is reinvested and compounds within the FD. Banks deduct TDS at 10% once your interest crosses ₹40,000 in a year (₹50,000 for senior citizens). You can submit Form 15G/15H to avoid TDS if your total income is below the taxable limit.

Yes. PPF enjoys EEE (Exempt-Exempt-Exempt) status — your contribution up to ₹1.5 lakh a year qualifies for Section 80C deduction, the interest (currently around 7.1%, compounded annually) is tax-free, and the maturity amount is fully exempt. This makes its effective return far higher than a taxable FD at the same headline rate.

Start early and stay invested — time is the biggest lever, since the later years contribute the most growth. Reinvest all interest and dividends rather than spending them, choose a higher (suitable) compounding frequency where offered, and avoid premature withdrawals that reset the snowball. Even a small monthly amount left for 20–30 years can outgrow a larger sum invested late.