A Compound Interest Calculator helps you estimate the future value of investments or savings by calculating:
✅ Principal Amount
✅ Interest Rate (%)
✅ Time Period (Years)
✅ Compounding Frequency (Yearly, Quarterly, Monthly, Daily)

Compound interest is the “interest on interest” effect, making it one of the most powerful wealth-building tools.

How Compound Interest Works

Compound Interest Formula:

A=P×(1+rn)n×t

  • A = Future Value

  • P = Principal (Initial Investment)

  • r = Annual Interest Rate (in decimal)

  • n = Compounding Frequency per Year

  • t = Time in Years

Example Calculation:

  • Principal (P): ₹1,00,000

  • Rate (r): 8% p.a. (0.08)

  • Tenure (t): 10 years

  • Compounding (n): Quarterly (4 times/year)

Future Value (A):

A=1,00,000×(1+0.084)4×10≈∗∗₹2,20,804∗∗

Total Interest Earned: ₹2,20,804 – ₹1,00,000 = ₹1,20,804

Compound vs Simple Interest

Factor Compound Interest Simple Interest
Growth Exponential (curve) Linear (straight line)
Formula A=P(1+r/n)nt A=P(1+rt)
Best For Long-term investments Short-term loans

Example:

  • ₹1L at 8% for 10 years:

    • Compound Interest: ₹2.2L

    • Simple Interest: ₹1.8L

Power of Compounding (Key Examples)

Investment Annual Return 10 Years 20 Years 30 Years
₹10,000/month 10% ₹20.6L ₹75.9L ₹2.26 Cr
₹50,000 lump sum 12% ₹1.55L ₹4.82L ₹14.98L

Small, regular investments grow massively over time!

How Compounding Frequency Affects Returns

Frequency ₹1L @ 8% for 10 Years
Yearly ₹2,15,892
Quarterly ₹2,20,804
Monthly ₹2,22,589
Daily ₹2,23,140

Key Insight: More frequent compounding = Higher returns.

Where Can You Earn Compound Interest?

  1. Mutual Funds (Equity/Debt) – 10-15% CAGR (long-term)

  2. PPF – 7.1% p.a. (tax-free)

  3. FD/RD – 6-8% p.a. (quarterly compounding)

  4. NPS – 8-12% p.a. (market-linked)

FAQs on Compound Interest

1. What is the “Rule of 72”?

  • Estimates doubling time: 72 ÷ Interest Rate = Years to double.
    (e.g., 8% return → doubles in ~9 years).

2. Can compound interest work against you?

  • Yes! Loans (credit cards, personal loans) use compounding to charge high interest.

3. How to maximize compounding benefits?

  • Start early + invest long-term + reinvest dividends.

4. Is compound interest taxable?

  • Yes, except in tax-free instruments (PPF, ELSS after 3 years).

5. Best calculator for SIP compounding?

  • Use an SIP Calculator (accounts for regular contributions).

Try Our Free Compound Interest Calculator

Plan your wealth creation with our Compound Interest Calculator:
📌 Compare different compounding frequencies
📌 Project long-term investment growth
📌 Optimize tax-efficient compounding

Calculate Now & Harness the Power of Compounding!

Key Takeaways

  • Compound Interest = P×(1+r/n)nt

  • Start early – Time is the biggest multiplier

  • Equity investments compound best (10-15% returns)