Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest (which is calculated only on the principal), compounding means your interest itself earns interest — creating exponential growth over time. This is the fundamental principle behind long-term wealth creation in investments.

The compound interest formula is:

A = P × (1 + r/n)^(n×t)

Where A is the maturity amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the time in years. Interest earned = A − P.

The more frequently interest compounds, the higher the effective annual yield. For a 10% nominal rate on ₹1 lakh:

• Annually: ₹1,10,000
• Semi-annually: ₹1,10,250
• Quarterly: ₹1,10,381
• Monthly: ₹1,10,471

The difference is small in the short term but becomes significant over decades. Use this calculator to compare frequencies.

Simple interest is computed only on the original principal: Interest = P × r × t. Compound interest adds the interest earned back to the principal at each compounding period, so subsequent interest is calculated on a growing base. For long tenures, compound interest generates substantially higher returns than simple interest at the same nominal rate.