Compound Interest Calculator
Calculate how your money grows with compound interest — for any principal, rate, time period, compounding frequency, and optional regular contributions.
What Is Compound Interest?
Compound interest is interest calculated not just on your original principal, but also on the interest that has already accumulated. Albert Einstein is famously (if apocryphally) said to have called compound interest the "eighth wonder of the world" — and for good reason: over long periods, the snowball effect of "interest on interest" can dramatically outpace simple interest, where you only ever earn interest on the original amount.
The Compound Interest Formula
A = P × (1 + r/n)n×t
Where: A = final amount, P = principal, r = annual interest rate (decimal), n = number of times interest compounds per year, t = time in years. Total interest earned = A − P.
If you add regular contributions at each compounding interval (like a recurring deposit or a SIP), the future value of those contributions is calculated separately using the future value of an annuity formula and added to the lump-sum growth.
Worked Example
You invest ₹1,00,000 at 8% p.a., compounded annually, for 10 years, with no additional contributions:
- A = 1,00,000 × (1.08)^10 ≈ ₹2,15,892
- Total Interest Earned ≈ ₹1,15,892 — more than your original principal!
Now compare that to simple interest at the same 8% rate: you'd earn only ₹8,000 × 10 = ₹80,000 in interest, for a total of ₹1,80,000. The extra ₹35,892 in the compound scenario is the result of "interest on interest" — and this gap widens exponentially the longer the money stays invested.
Why Compounding Frequency Matters
More frequent compounding (monthly or daily vs. annually) results in a slightly higher effective return for the same nominal rate, because interest starts earning interest sooner. The difference is usually small for typical rates (a few hundred rupees on a ₹1 lakh deposit over a year), but it adds up over long horizons. This is why understanding the "effective annual rate" matters when comparing products that compound at different frequencies — always compare like-for-like.
The Rule of 72 — A Quick Mental Shortcut
To estimate how many years it takes for an investment to double at a given annual compound rate, divide 72 by the interest rate. For example, at 8% p.a., your money roughly doubles in 72 ÷ 8 = 9 years. At 12% (a typical long-term equity assumption), it doubles in about 6 years. This rule is a handy sanity check, though this calculator gives you the exact figure for any combination of inputs.
Compounding in Everyday Indian Financial Products
| Product | Typical Compounding | Indicative Rate (2026) |
|---|---|---|
| Bank Savings Account | Quarterly | ~2.5% – 3.5% |
| Fixed Deposit (FD) | Quarterly | ~3% – 8.5% |
| PPF (Public Provident Fund) | Annually | 7.1% |
| Equity Mutual Funds | Continuous (market-linked) | ~11-17% historical CAGR |
The Power of Adding Regular Contributions
Use the "Additional Contribution per Period" field to model what happens when you keep adding money — for example, ₹5,000 every month into the same investment. Even modest regular contributions, compounded over decades, can grow into a substantial corpus due to the combined effect of (a) more capital invested and (b) each contribution itself compounding for the remaining duration. This is the core principle behind retirement planning, SIPs, and RDs — start early, contribute consistently, and let time do the heavy lifting.
Tax Impact: "Tax Drag" on Compounding
For instruments like bank FDs, interest is taxed every year at your slab rate (even on cumulative FDs, since interest accrues annually for tax purposes), which reduces the amount available to compound going forward — this is called "tax drag." In contrast, tax-deferred or tax-exempt instruments (like PPF, which is fully exempt under the EEE — Exempt-Exempt-Exempt — structure, or equity investments where tax is only triggered on redemption) allow the full pre-tax return to compound uninterrupted, often resulting in significantly higher final corpus over long periods despite an identical headline rate.
Compound Growth vs. Inflation
A high compound interest rate doesn't automatically mean strong real wealth creation — you must compare it against inflation. If your investment compounds at 7% while inflation runs at 5%, your real (purchasing-power-adjusted) growth is much smaller than the headline 7% suggests. Use our Inflation-Adjusted Returns Calculator alongside this tool to see the real picture for long-term goals.
Frequently Asked Questions
What's the difference between compound interest and simple interest?
Simple interest is calculated only on the original principal throughout the tenure. Compound interest is calculated on the principal plus all previously accumulated interest, so your interest itself starts earning interest — leading to faster, exponential growth over time.
Does compounding frequency make a big difference?
For most everyday rates (5-10%), the difference between annual and monthly compounding is modest — typically less than 1% extra growth per year. However, over very long periods (20-30 years), even small differences compound into meaningful amounts, so it's worth checking the compounding frequency when comparing similar products.
How is this different from an FD or RD calculator?
This is a general-purpose compound interest calculator that works for any scenario — lump sum, recurring contributions, any compounding frequency, and any currency. Our FD Calculator and RD Calculator are specialized versions tuned to how Indian banks structure those specific products (e.g., RD's per-installment compounding).
Why does my actual FD or savings account growth differ slightly from this calculator?
Real-world products may use slightly different day-count conventions, rounding rules, or apply taxes (TDS) annually, which reduces the amount that continues to compound. This calculator shows the theoretical pre-tax compound growth based on the exact formula and inputs you provide.