Compound Interest Calculator
Calculate compound interest on any principal. Choose compounding frequency, rate and tenure to see the maturity amount and total interest earned.
Formula last reviewed 15 September 2026 · How we verify our calculators
Maturity amount
- Principal
- ₹1,00,000
- Total interest
- ₹61,051
Updates live as you type
Frequently asked questions
Compound interest is interest calculated on a balance that already includes previously earned interest, rather than on the original principal alone. Because the base grows each period, so does the interest, which turns a straight line into a curve. The effect is modest over one or two years and dominant over twenty: 1,00,000 at 10% earns 50,000 over five years under simple interest and 61,051 under compounding, but over twenty years the figures are 2,00,000 and 5,72,750.
A = P x (1 + r/n)^(n x t), where P is the principal, r the annual rate as a decimal, n the number of compounding periods per year and t the time in years. Interest earned is simply A minus P. Dividing r by n gives the rate applied in each period and multiplying n by t gives how many periods occur, so the exponent is what carries the whole compounding effect.
More frequent compounding always earns more, but with sharply diminishing returns. On 1,00,000 at 10% for five years: annually gives 1,61,051, half-yearly 1,62,889, quarterly 1,63,862 and monthly 1,64,531. Moving from annual to quarterly is worth about 2,811, while quarterly to monthly adds only 669. This is why the difference between monthly and daily compounding is usually negligible, and why effective annual rate is a more useful comparison than the headline rate.
Simple interest is always computed on the original principal, so it produces an identical amount every single period and grows linearly. Compound interest is computed on the running balance, so each period produces slightly more than the last. Over short periods the two are close enough that the distinction rarely matters; over decades the compound figure can be several times the simple one. Most deposits, loans and investments compound — simple interest is comparatively rare in practice.
A mental shortcut for doubling time: divide 72 by the annual rate to get roughly how many years the money takes to double. At 10% that gives 7.2 years against an exact answer of 7.27; at 6% it gives 12 years; at 18%, four. It is accurate enough for rates between about 5% and 20% and is the fastest way to sanity-check a claim about returns. Anyone promising to double your money in three years is claiming about 26% a year, sustained.
Very much so, and it is rarely explained to borrowers with the enthusiasm it is explained to savers. Credit cards typically compound monthly on annual rates between 36% and 48%, so a revolving balance grows on exactly the same curve that makes long-term investing work. Minimum payments are generally calibrated to keep the balance outstanding for years. Running this calculation on a card balance you are carrying is usually more persuasive than any budgeting advice.
Usually three reasons, all outside the arithmetic. Tax: interest taxed at a 30% slab turns a 10% return into roughly 7% net, and if tax is paid annually the amount that compounds is smaller too. Fees: a 1% expense ratio over twenty years removes about a sixth of the final corpus, because the fee compounds against you exactly as returns compound for you. And volatility: market returns arrive as a jagged sequence, not a steady annual credit.
CAGR is the constant rate that would take you from the starting value to the ending value over the period — it is what actually happened to your money. An average return is the arithmetic mean of the yearly figures, and it systematically overstates outcomes when returns vary. A fund that gains 50% then loses 50% has an average return of zero but a CAGR of about -13.4%, because 100 becomes 150 and then 75. When comparing investments, CAGR is the honest number.
No — an amortising loan needs a different formula. Compound interest assumes the balance grows untouched, whereas a loan balance falls every month as you repay principal, so interest is charged on a shrinking amount. Use an EMI calculator for that, which solves for the fixed monthly payment that clears the balance exactly over the tenure. This calculator is right for deposits, investments and any debt where nothing is being repaid, such as an accruing unpaid balance.
The difference one word makes
₹1,00,000 at 10% for five years earns ₹50,000 under simple interest and ₹61,051 under compound interest. The same principal, the same rate, the same period — an extra ₹11,051 produced by nothing more than *when* the interest is calculated. Stretch the horizon to twenty years and the gap stops being a detail: simple interest yields ₹2,00,000 while compounding yields ₹5,72,750, nearly three times as much.
Compound interest is interest calculated on a balance that already includes previously earned interest. Simple interest always computes against the original principal, so it produces the same amount every period forever. Compound interest computes against a balance that grows, so each period produces slightly more than the last. That single structural difference is what separates a linear line from a curve, and it is why the concept underpins everything from a savings account to a credit card bill.
The asymmetry worth internalising is that compounding works identically in both directions. The mechanism that turns ₹1 lakh into ₹5.7 lakh over twenty years is the same one that turns an unpaid ₹50,000 credit card balance at 42% annual rate into something unrecognisable within a few years. Investors are taught to admire compounding; borrowers rarely have it explained to them at all.
The formula, and what each part controls
A = P × (1 + r/n)^(n × t)
- A — the final amount, principal plus all accumulated interest.
- P — the principal you start with.
- r — the annual rate as a decimal: 10% becomes 0.10.
- n — how many times a year interest is compounded.
- t — time in years.
Interest earned alone is A − P.
The whole engine sits in the exponent. Dividing r by n gives the rate applied in a single period; multiplying n by t gives how many such periods occur. Raising the per-period growth factor to that power is what makes each period's interest build on every previous one.
Why n matters. The same ₹1,00,000 at 10% for five years:
- Annually (n = 1): ₹1,61,051
- Half-yearly (n = 2): ₹1,62,889
- Quarterly (n = 4): ₹1,63,862
- Monthly (n = 12): ₹1,64,531
More frequent compounding always yields more, but with sharply diminishing returns — the jump from annual to quarterly is worth ₹2,811, while quarterly to monthly adds only ₹669. This is why the difference between monthly and daily compounding is usually negligible, and why lenders quoting an "effective annual rate" are simply telling you what a frequently-compounded rate works out to over a year.
Five years at 10%, worked in full
P = 1,00,000, r = 0.10, n = 1, t = 5.
Year 1. Interest = 1,00,000 × 0.10 = ₹10,000. Balance: ₹1,10,000.
Year 2. Interest = 1,10,000 × 0.10 = ₹11,000. Balance: ₹1,21,000. The extra ₹1,000 over year one is interest earned on year one's interest.
Year 3. Interest = 1,21,000 × 0.10 = ₹12,100. Balance: ₹1,33,100.
Year 4. Interest = 1,33,100 × 0.10 = ₹13,310. Balance: ₹1,46,410.
Year 5. Interest = 1,46,410 × 0.10 = ₹14,641. Balance: ₹1,61,051.
Total interest: ₹61,051, against ₹50,000 under simple interest. Note the annual interest climbing from ₹10,000 to ₹14,641 — it rose 46% while the rate never moved.
Via the formula directly: (1.10)⁵ = 1.61051, and 1,00,000 × 1.61051 = ₹1,61,051.
The Rule of 72. Divide 72 by the rate to approximate the doubling time. At 10%, 72 ÷ 10 ≈ 7.2 years, and the exact answer is 7.27 — close enough for mental arithmetic. At 6% it is 12 years; at 18%, four. It is the fastest way to sanity-check any claim about returns without a calculator.
Where this calculation earns its keep
Comparing offers with different compounding. A deposit at 9.8% compounded annually and one at 9.6% compounded quarterly are closer than they look; only running both settles it.
Understanding a debt. Credit cards compound monthly on an annual rate often between 36% and 48%. Running the numbers on a balance you are carrying is usually more motivating than any budgeting advice.
Sanity-checking an investment claim. Anyone promising to double money in three years is claiming roughly 26% a year, sustained. The Rule of 72 exposes that in seconds.
Estimating the cost of waiting. Delaying a ₹1 lakh investment by five years at 10% does not cost ₹50,000 — it costs the ₹1.61 lakh that ₹1 lakh would have become, compounding for those five years at the far end of the horizon.
Reading your result carefully
The figure this calculator produces is nominal and pre-tax, and both qualifiers matter.
Nominal means it is not adjusted for inflation. ₹1,61,051 in five years buys what roughly ₹1,20,000 buys today at 6% inflation. The real return on a 10% nominal investment during 6% inflation is not 4% exactly but closer to 3.8%, since the adjustment is a division rather than a subtraction.
Pre-tax matters more. If the interest is taxable at a 30% slab, your ₹61,051 becomes about ₹42,736, dropping the effective rate to roughly 7.4%. For anything taxed annually — most deposits and bonds — tax is deducted each year, which also reduces the base that compounds.
The most useful thing to do with the result is vary one input at a time. Changing the rate from 10% to 12% over twenty years adds far more than most people intuitively expect; changing the term from twenty years to twenty-five adds more still. Time is the input with the steepest effect, which is the practical reason "start early" is repeated so often.
Where the concept is misapplied
Assuming market returns compound smoothly. A 12% expected equity return is an average across volatile years, not an annual credit. Sequence matters enormously in real portfolios, especially once you are withdrawing.
Confusing CAGR with average return. A fund that gains 50% then loses 50% has an average return of zero and a CAGR of −13.4%. Your ₹100 is ₹75. The average is arithmetically true and practically misleading.
Ignoring fees. A 1% annual expense ratio does not cost 1%. Over twenty years at 10%, it removes roughly 17% of the final corpus, because the fee compounds against you exactly as returns compound for you.
Applying the formula to loan EMIs. An amortising loan is not simple compound interest — the balance falls as you repay, so it needs the EMI formula instead.
Forgetting this works against you. The minimum payment on a credit card is calibrated to keep a balance compounding for years. The same curve that makes retirement saving work makes revolving debt close to unescapable.
Treating the output as a forecast. It is arithmetic applied to an assumed rate. The arithmetic is exact; the rate is a guess, and the longer the horizon the more the guess dominates the answer.
Confusing nominal and effective rates. A card advertising "3% per month" is not charging 36% a year — compounded monthly it is an effective 42.6%. Lenders quote the nominal figure because it sounds smaller, and the gap widens as the rate rises. Whenever two offers compound at different frequencies, convert both to an effective annual rate with (1 + r/n)ⁿ − 1 before comparing. It is the only way to see which is actually cheaper, and it takes seconds once you know the rates involved.