Compound Interest Calculator
Calculate Smarter. Work Faster.
Calculate the maturity amount and total interest earned on any principal, at any compounding frequency, with a year-wise growth breakdown.
Investment Details
Enter your principal, interest rate, time period, and compounding frequency.
Currency changes the display format only — it does not convert the amount you enter between currencies.
Enter your investment details and hit calculate
Calculate to see the year-wise balance growth.
Understanding Compound Interest
Compound interest is interest calculated on both the original principal and the interest already accumulated, so the growth accelerates over time compared to simple interest. It's widely used to model the growth of deposits and investments when previously earned interest is added to the amount that earns future interest.
Formula used: A = P(1 + r/n)^(nt), where A is the maturity 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. Compound Interest = A − P.
Worked example: a principal of 100,000 (in any currency — for example, ₹1,00,000 for an investor in India) at 7.5% p.a., compounded quarterly (n=4) for 5 years: A = 100,000 × (1 + 0.075/4)^(4×5) ≈ 144,995. So the total compound interest earned is approximately 44,995.
Why compounding frequency matters: at the same nominal annual rate, more frequent compounding (say monthly vs annually) produces a slightly higher effective return, because each compounding period's interest starts earning interest sooner. The gap widens with longer time horizons and higher rates.
This calculator is for educational and planning purposes only. For fractional-year periods, it applies the standard compound-interest formula continuously across the stated time; actual financial products may use different day-count or compounding conventions. Actual returns from bank deposits or investment products depend on the specific product's compounding convention and applicable terms.
How Compounding Frequency Changes Your Returns
| Frequency | Maturity (100,000 @ 7.5%, 5yr) | Interest Earned |
|---|---|---|
| Annually | 143,563 | 43,563 |
| Semi-Annually | 144,504 | 44,504 |
| Quarterly | 144,995 | 44,995 |
| Monthly | 145,329 | 45,329 |
Moving from annual to monthly compounding on the same nominal rate adds roughly 1,766 to a 100,000/5-year investment in this example — a real but modest gain at typical bank rates. The effect becomes more meaningful at higher interest rates or over longer investment horizons, which is why it's worth checking the compounding convention when comparing similarly-rated deposit products.
The Rule of 72, CAGR, and Real (Inflation-Adjusted) Returns
Rule of 72 — a quick mental shortcut: dividing 72 by the annual interest rate gives an approximate number of years for your money to double under compound interest. At 8% p.a., money roughly doubles in 72 ÷ 8 = 9 years; at 12% p.a., in about 6 years. It's a useful approximation, with accuracy varying by interest rate (best in the roughly 6-10% range), not a substitute for the exact formula this calculator uses, but it's handy for quick back-of-envelope comparisons between products.
CAGR vs compound interest: Compound Annual Growth Rate (CAGR) is essentially the same mathematical idea applied backward — given a starting value, an ending value, and a time period, CAGR tells you the constant annual compounding rate that would connect the two. It's commonly used to compare mutual fund or stock returns over multi-year periods, since actual year-to-year returns are rarely uniform, unlike the fixed-rate compounding this calculator assumes for FDs and RDs.
Nominal vs real (inflation-adjusted) return: the maturity amount this calculator shows is your nominal return — it doesn't account for inflation eroding purchasing power over the same period. A quick approximation is nominal rate minus inflation rate; at 7.5% nominal interest and 5% inflation, your real return is roughly 2.5% per year. For a more precise estimate, use (1 + nominal return) ÷ (1 + inflation) − 1, which gives about 2.4% in this example — close to the quick approximation at these rate levels, but the two diverge more as rates rise. This matters a great deal when comparing a "safe" FD against equity-linked options over long horizons.
Common Mistakes When Estimating Compound Interest
1. Confusing nominal rate with effective annual rate. A 12% nominal rate compounded monthly yields a higher effective annual rate than 12% compounded annually — always check which rate a product is quoting before comparing options.
2. Forgetting to convert the rate and time consistently. The formula requires the rate as a decimal and time in years matching the compounding frequency (n) — mixing units (e.g., months for t with annual n) produces a wrong result.
3. Ignoring tax on interest earned. Interest income may be taxable depending on the product, applicable tax rules, and your individual circumstances, and TDS may apply in certain cases — the post-tax return is typically lower than the calculated maturity amount suggests.
4. Assuming compounding frequency alone determines the best product. A slightly lower nominal rate with more frequent compounding can sometimes underperform a higher nominal rate with less frequent compounding — always compare the actual maturity amount, not just the compounding label.
5. Not accounting for premature withdrawal penalties. Many compound-interest products (like FDs) charge a penalty or reduced rate on premature withdrawal, which changes your actual realized return versus the full-term calculation.
6. Ignoring inflation when judging whether a "good" rate is actually good. An 8% FD return sounds attractive until you net out 5-6% inflation — always think in terms of real, inflation-adjusted return when comparing long-term investment options, not just the nominal quoted rate.
Frequently Asked Questions
What is the formula for compound interest? +
Compound Interest uses A = P(1 + r/n)^(nt), where A is the maturity amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of times interest compounds per year, and t is the time in years. Compound Interest = A − P.
How does compounding frequency affect returns? +
The more frequently interest compounds (monthly vs annually, for example), the higher the effective return on the same nominal annual rate, since interest starts earning interest sooner. The difference is usually modest for short periods but becomes more noticeable over longer durations.
What is the difference between simple interest and compound interest? +
Simple interest is calculated only on the original principal throughout the term, so it grows linearly. Compound interest is calculated on the principal plus previously accumulated interest, so the balance grows at an accelerating rate under a fixed positive rate — compound interest generally equals or exceeds simple interest for the same principal, rate, and time.
Which bank products typically use compound interest? +
Many deposit and savings products calculate interest using periodic compounding, but the exact calculation and crediting convention depends on the bank and product terms.
Does a higher compounding frequency always mean noticeably higher returns? +
The gain from higher compounding frequency (e.g., monthly vs annually) is generally small for typical interest rates and shorter durations, but the effect compounds meaningfully over long time horizons (10+ years) or at higher interest rates.
What is the Rule of 72 and how accurate is it? +
The Rule of 72 approximates the number of years for an investment to double by dividing 72 by the annual interest rate. It's reasonably accurate for rates between roughly 6% and 10%, and becomes progressively less precise outside that range — use this calculator's exact formula for a precise doubling period.
How is CAGR different from the compound interest this calculator computes? +
This calculator projects forward from a fixed rate to a future value. CAGR works backward — given a known starting and ending value over a period, it derives the constant annual rate that connects them, which is why it's commonly used to summarize the effective annual return of investments (like mutual funds) whose actual year-to-year returns fluctuate.
Should I compare FD returns against inflation? +
Yes — the maturity amount this calculator shows is a nominal figure and doesn't account for inflation eroding your money's purchasing power over the same period. Subtracting the prevailing inflation rate from your nominal return gives a rough real return, which is a more meaningful number for long-term financial planning.
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