Compound Interest Calculator
Calculate compound interest using A = P(1 + r/n)^nt with year-wise growth table and simple interest comparison.
Compound Interest Formula
Compound interest is calculated on both the principal and the accumulated interest from previous periods — making it the engine of wealth creation.
The power of compounding
Divide 72 by the interest rate to find how many years it takes to double your money. At 10%, your money doubles in ~7.2 years. At 8%, it doubles in 9 years.
₹1 lakh at 12% for 30 years grows to ₹29.96 lakh. Wait 10 years and invest the same for 20 years — you get only ₹9.65 lakh. Starting early is more powerful than investing more.
Monthly compounding at 10% gives 10.47% effective annual yield. Daily compounding gives 10.52%. More frequent compounding means more growth, though the difference narrows at higher frequencies.
Frequently asked questions
What is the difference between compound interest and simple interest?
Simple interest is calculated only on the original principal: SI = P × R × T / 100. Compound interest is calculated on principal plus accumulated interest. Over time, the gap between CI and SI grows significantly. On ₹1 lakh at 10% for 10 years: SI = ₹1 lakh, CI ≈ ₹1.59 lakh (quarterly).
Which investments in India use compound interest?
Fixed Deposits, Recurring Deposits, PPF, EPF, NSC, and most mutual fund SIPs effectively compound your returns. FDs compound quarterly. PPF compounds annually at 7.1% (as of 2025). Equity mutual funds compound through reinvestment of returns over time.
How does compounding frequency affect returns?
More frequent compounding increases effective annual yield. Annual compounding at 10% = 10% effective yield. Monthly compounding at 10% = 10.47% effective yield. Daily = 10.52%. The difference is significant only at higher rates and longer periods.
What is the effective annual rate (EAR)?
EAR = (1 + r/n)^n − 1. It shows the true annual return accounting for compounding frequency. A 10% rate compounded monthly has EAR = (1 + 0.10/12)^12 − 1 = 10.47%. Banks are required to disclose EAR.
Can I calculate CI for partial years?
Yes. Use the same formula with t as a decimal. For 18 months, use t = 1.5. For 6 months, t = 0.5. This calculator uses whole years for the growth table, but the formula works for any time period.