What is the compound interest formula?

A = P × (1 + r/n)^(n×t), where P is principal, r is annual interest rate, n is compounding frequency per year, and t is time in years.

What is the difference between simple and compound interest?

Simple interest is calculated only on the principal. Compound interest is calculated on principal plus accumulated interest, so it grows faster over time.

Which compounding frequency gives the highest return?

Daily compounding gives the highest return, followed by monthly, quarterly, half-yearly, and annual. However, the difference is small for typical interest rates.

Home›Calculators›Compound Interest

📊 Compound Interest Calculator

Calculate compound interest growth with flexible compounding periods and initial deposits.

Principal Amount (₹)

₹

Annual Interest Rate (%)

Time Period (Years)

Compounding Frequency

💡 Compound interest grows exponentially. More frequent compounding = slightly higher returns.

What is Compound Interest?

Compound interest is interest calculated on both the initial principal AND the accumulated interest from previous periods. Albert Einstein allegedly called it "the eighth wonder of the world — he who understands it, earns it; he who doesn't, pays it." This is the core mechanism behind how wealth grows in FDs, mutual funds, and PPF — and how debt spirals in credit cards and loans.

Compound Interest Formula

A = P × (1 + r/n)^(n×t)
CI = A − P
Where: P = Principal | r = Annual rate (decimal) | n = Times compounded per year | t = Time (years)

Compound vs Simple Interest: The Difference

₹1,00,000 invested at 10% for 10 years:

Simple Interest: ₹1,00,000 + (1,00,000 × 10% × 10) = ₹2,00,000
Compound (Annual): 1,00,000 × (1.10)^10 = ₹2,59,374
Compound (Monthly): 1,00,000 × (1+0.1/12)^120 = ₹2,70,704

Difference: ₹70,704 extra just from compounding vs simple interest.

Rule of 72 — Quick Mental Math

🧮

Rule of 72

Divide 72 by your interest rate to find how many years to double your money. At 8%: 72÷8 = 9 years to double. At 12%: 72÷12 = 6 years. Simple and surprisingly accurate.

📅

Compounding Frequency

Daily > Monthly > Quarterly > Annual compounding. A 10% rate compounded daily vs annually over 10 years: ₹27,179 difference on ₹1 lakh. More frequent = more wealth.

⏳

Time is Everything

₹1 lakh at 12% for 10 years = ₹3.1L. For 20 years = ₹9.6L. For 30 years = ₹29.9L. The last 10 years add more than the first 20 combined — this is the magic of compounding.

💳

The Dark Side

Credit card interest at 36–42% compounds monthly. ₹50,000 unpaid credit card debt becomes ₹2.16 lakh in just 5 years if only minimum payments are made. Always pay in full.

Best Compound Interest Instruments in India

PPF (Public Provident Fund): 7.1% compounded annually, tax-free returns, Section 80C benefit. 15-year lock-in. Best for long-term, risk-free wealth building.

Equity Mutual Funds via SIP: Historical 12–15% CAGR compounded. No guaranteed returns but inflation-beating over 10+ years.

Fixed Deposit: 6.5–8% compounded quarterly. Fully safe with DICGC insurance up to ₹5 lakhs.

NPS (National Pension System): Market-linked returns (8–12%), additional ₹50,000 deduction under 80CCD(1B), compounded until retirement at 60.