Compound Interest Calculator: How Investments Grow Over Time

What Is Compound Interest?

Compound interest means earning interest on your interest, not just on the principal. Each period's interest is added to the principal, and the next period's interest is calculated on the larger amount.

This compounding effect causes investments to grow exponentially rather than linearly over time.

Simple interest formula: Interest = Principal × Rate × Time

Compound interest formula: A = P × (1 + r/n)^(nt)

Where: A = final amount, P = principal, r = annual rate (decimal), n = compounding frequency per year, t = time in years.

Compounding Frequency Matters

Annual (n=1): Interest added once per year

Quarterly (n=4): Added four times per year — bank FDs typically compound quarterly

Monthly (n=12): Added twelve times per year — many savings products

Daily (n=365): Most frequent — small but real advantage over monthly

Example: Rs 1 lakh at 8% for 10 years:

Annual compounding: Rs 2,15,892

Quarterly compounding: Rs 2,20,804

Monthly compounding: Rs 2,21,964

Daily compounding: Rs 2,22,535

Quarterly vs annual compounding gives Rs 4,912 more over 10 years on Rs 1 lakh.

Rule of 72: Quick Doubling Estimate

Divide 72 by the annual interest rate to estimate how many years it takes to double your money.

At 8%: 72 ÷ 8 = 9 years to double

At 12%: 72 ÷ 12 = 6 years to double

At 15%: 72 ÷ 15 = 4.8 years to double

Fixed Deposit (FD) Compound Interest in India

Bank FDs in India compound interest quarterly. A 1-year FD at 7% annual rate compounded quarterly:

Effective annual rate = (1 + 0.07/4)^4 - 1 = 7.19%

FD interest is taxable as per your income tax slab. For high earners in the 30% bracket, effective post-tax return is significantly lower.

Mutual Fund Compounding (CAGR)

Mutual fund returns are expressed as CAGR (Compound Annual Growth Rate). A Nifty 50 index fund with 12% CAGR means your investment doubles every 6 years (Rule of 72).