See how much your money grows with compound interest at any rate and compounding frequency.
Compound interest formula
A = P × (1 + r ÷ n)^(n × t) CI = A − Pn is how many times interest is added each year: 1 yearly, 2 half-yearly, 4 quarterly, 12 monthly.
Example
₹1,00,000 at 8% for 5 years: yearly compounding → ₹1,46,933 (CI ₹46,933); quarterly → ₹1,48,595. Simple interest would be only ₹40,000.
Why compounding matters
Interest earns interest. Over 20 years at 8%, ₹1 lakh becomes ₹4.66 lakh compounded versus ₹2.6 lakh with simple interest. The longer the time, the bigger the gap — which is why starting a SIP early is so powerful.
How to use the compound interest calculator
- Enter the principal — the amount you start with.
- Enter the yearly interest rate and the number of years.
- Choose how often interest is added: yearly, half-yearly, quarterly (banks) or monthly.
- Read the final amount and the total interest; the year-wise table shows how the balance snowballs.
Step-by-step: ₹1,00,000 at 8% for 5 years
A = P × (1 + r ÷ n)n × t- Yearly compounding (n = 1): 1,00,000 × 1.085 = 1,00,000 × 1.4693 = ₹1,46,933.
- Quarterly (n = 4): 1,00,000 × (1 + 0.02)20 = ₹1,48,595.
- Monthly (n = 12): 1,00,000 × (1.00667)60 = ₹1,48,985.
- The same 8% earns ₹2,052 more when compounded monthly instead of yearly — that is the compounding effect.
Compare with simple interest: 1,00,000 × 8 × 5 ÷ 100 = ₹40,000, i.e. ₹1,40,000 in total. Compounding earns ₹6,933 more even at yearly frequency.
Worked examples
| Situation | Working | Answer |
|---|
| ₹50,000 at 10% for 3 years, yearly | 50,000 × 1.13 | ₹66,550 |
| ₹3,00,000 at 7.5% for 2 years (FD, quarterly) | 3,00,000 × (1.01875)8 | ₹3,46,687 |
| ₹2,00,000 at 12% for 10 years (mutual fund, yearly) | 2,00,000 × 1.1210 | ₹6,21,170 |
The rule of 72
Divide 72 by the interest rate to get the years needed to double your money: at 8% money doubles in about 9 years, at 12% in 6 years, at 6% in 12 years. It is a handy check on any calculator result.
Tips and common mistakes
- Bank FDs and RDs compound quarterly; PPF, NSC and SSY compound yearly; most loan interest compounds monthly.
- Inflation compounds too — at 6% inflation, ₹1 lakh buys only about ₹56,000 worth of goods after 10 years.
- For a monthly investment instead of a one-time amount use the SIP Calculator; for a one-time investment in mutual funds the Lumpsum Calculator uses the same formula.
Frequently asked questions
What is the compound interest on ₹1 lakh at 10% for 3 years?
₹33,100 with yearly compounding (amount ₹1,33,100); ₹34,489 with quarterly compounding.
What does compounded quarterly mean?
Interest is calculated and added to the principal every 3 months, so the next quarter earns interest on a slightly bigger amount.
Which gives more — monthly or yearly compounding?
Monthly, slightly. At 8%, ₹1 lakh for 5 years gives ₹1,48,985 monthly vs ₹1,46,933 yearly.