Compound Interest Calculator
Compound interest is interest calculated on your initial principal and on all cumulative interest accumulated from previous cycles. Enter your principal, annual rate, time horizon, and compounding frequency below to see your exact maturity balance and exponential wealth growth.
Compound Interest Calculator
Your initial deposit or investment
Yearly rate of return
How long the money stays invested
How often interest is added
Maturity Value
Principal
Interest Earned
Maturity Composition
Growth Curve Over Time
Hover or tap on the bars to inspect growth details
Yearly Compounding BreakdownShow Details
| Year | Principal | Accumulated Interest | Maturity Value |
|---|---|---|---|
| Year 1 | ₹1,00,000 | ₹7,000 | ₹1,07,000 |
| Year 2 | ₹1,00,000 | ₹14,490 | ₹1,14,490 |
| Year 3 | ₹1,00,000 | ₹22,504 | ₹1,22,504 |
| Year 4 | ₹1,00,000 | ₹31,080 | ₹1,31,080 |
| Year 5 | ₹1,00,000 | ₹40,255 | ₹1,40,255 |
| Year 6 | ₹1,00,000 | ₹50,073 | ₹1,50,073 |
| Year 7 | ₹1,00,000 | ₹60,578 | ₹1,60,578 |
| Year 8 | ₹1,00,000 | ₹71,819 | ₹1,71,819 |
| Year 9 | ₹1,00,000 | ₹83,846 | ₹1,83,846 |
| Year 10 | ₹1,00,000 | ₹96,715 | ₹1,96,715 |
What Is Compound Interest and How Does It Differ From Simple Interest?
In standard finance, Simple Interest applies only to the original principal amount deposited or borrowed. In contrast, Compound Interest is calculated on both the initial principal and the interest accumulated over previous periods. This reinvestment mechanism creates an exponential growth curve (often referred to as the snowball effect).
For example, a deposit of ₹1,00,000 at 8% simple interest yields ₹8,000 per year, totaling ₹80,000 in interest over 10 years (final balance: ₹1,80,000). The same ₹1,00,000 compounded annually at 8% generates ₹1,15,892 in interest over 10 years (final balance: ₹2,15,892) — an additional ₹35,892 with zero extra capital contributed.
The Compound Interest Formula & Variable Breakdown
The mathematical equation governing discrete compound interest is expressed as:
A = P × (1 + r / n)^(n × t)
Where:
- A (Maturity Amount): The total future value of the investment including accumulated interest.
- P (Principal Amount): The initial sum deposited or invested.
- r (Annual Interest Rate): The annual rate as a decimal (e.g. 7.5% = 0.075).
- n (Compounding Frequency): The number of compounding cycles per year (Annually = 1, Semi-Annually = 2, Quarterly = 4, Monthly = 12, Daily = 365).
- t (Time Period): The investment horizon expressed in years.
Case Study: How Compounding Frequency Multiplies Yield (₹5,00,000 at 8% over 10 Years)
More frequent compounding accelerates growth because earned interest is added back to the working capital earlier:
| Compounding Frequency | Cycles / Year (n) | Total Interest Earned | Final Maturity Value | Effective Annual Rate (APY) |
|---|---|---|---|---|
| Annually | 1 | ₹5,79,462 | ₹10,79,462 | 8.00% |
| Semi-Annually | 2 | ₹5,95,561 | ₹10,95,561 | 8.16% |
| Quarterly | 4 | ₹6,04,020 | ₹11,04,020 | 8.24% |
| Monthly | 12 | ₹6,09,820 | ₹11,09,820 | 8.30% |
Key Takeaway: Choosing monthly compounding over annual compounding on ₹5 Lakh generates an extra ₹30,358 in pure profit with zero added investment. Learn more in our guide on The Power of Compound Interest.
The Rule of 72: A Fast Mental Calculation Shortcut
The Rule of 72 is a well-established mental shortcut in financial planning used to estimate how many years it takes for an investment to double in value at a fixed annual compound rate:
Years to Double ≈ 72 / Annual Interest Rate (%)
- At 6% interest: Money doubles in approximately 12 years (72 / 6).
- At 8% interest: Money doubles in approximately 9 years (72 / 8).
- At 12% interest: Money doubles in approximately 6 years (72 / 12).
Frequently Asked Questions
What is the difference between Nominal Interest Rate and Effective Annual Yield (APY)?+
The Nominal Interest Rate is the stated rate quoted by the bank (e.g. 8.0%). The Annual Percentage Yield (APY or Effective Rate) accounts for the effects of intra-year compounding. For example, an 8% nominal rate compounded monthly yields an effective annual rate of 8.30%.
Which compounding frequency is standard for bank Fixed Deposits (FDs)?+
In India and many global banking jurisdictions, term fixed deposits (FDs) traditionally compound on a quarterly basis. Savings accounts typically calculate interest daily and credit quarterly or monthly.
Does this calculator account for income tax deductions (TDS) and inflation?+
This calculator computes pre-tax nominal maturity balances. In real-world finance, fixed deposit interest is subject to Tax Deducted at Source (TDS) according to your tax slab, and inflation reduces the purchasing power of the terminal amount.
What happens if I make regular periodic deposits instead of a single principal?+
If you are adding fresh capital on a monthly or quarterly basis, you should use our SIP Calculator or Recurring Deposit Calculator, which model annuity cash flows rather than a single lump-sum deposit.
Can compound interest be applied to loans as well as savings?+
Yes. Credit card balances, revolving credit lines, and negative amortization loans compound unpaid interest, which can cause debt to multiply rapidly if minimum payments are missed.
What is Continuous Compounding?+
Continuous compounding represents the mathematical limit of compounding where interest is added instantaneously at every infinitesimal moment, modeled using Euler's constant: A = P × e^(r × t).
Is my financial data stored or sent to any analytical backend?+
No. All calculations are executed purely in your local web browser engine. No financial numbers, rates, or user inputs are transmitted over the internet or saved.
Why is starting to invest early more important than investing larger sums later?+
Because compound growth is non-linear, the final 5 to 10 years of a long horizon generate the vast majority of total wealth. Starting 10 years earlier with half the monthly amount frequently beats starting later with double the capital.
Formulas on this calculator are reviewed by the AllYouTools Quantitative Research Team against official statutory standards. Read our Editorial Policy and explore full derivations in our Calculation Methodology.
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