Finance · Free tool
Compound Interest Calculator
Compute the maturity of any amount with adjustable compounding frequency (annual, half-yearly, quarterly, monthly, daily). Useful for investing, savings or understanding how 12% per year actually grows your money.
The compound-interest formula
Maturity = P × (1 + r/n)^(n × t) where P = principal, r = annual rate (as a decimal — 8% = 0.08), n = compounding periods per year, t = years. So ₹1,00,000 at 12% for 10 years, compounded annually, grows to 1,00,000 × (1.12)^10 = ₹3,10,585. Compounded monthly it's ₹3,30,039 — same nominal rate, slightly higher because of more frequent compounding.
Compounding frequency matters less than you think
At 8% for 10 years on ₹1 lakh:
- Annually — ₹2,15,892
- Half-yearly — ₹2,19,112 (+₹3,200)
- Quarterly — ₹2,20,804 (+₹4,900)
- Monthly — ₹2,21,964 (+₹6,000)
- Daily — ₹2,22,535 (+₹6,600)
Monthly vs daily compounding adds <0.3% to maturity. Time and rate matter far more. Doubling the tenure (10 → 20 years) more than doubles the maturity; halving the rate (8% → 4%) cuts it almost in half.
Rule of 72
Divide 72 by the annual rate to get how many years money doubles. 12% doubles in 6 years; 8% in 9; 6% in 12. Inverse: ₹1 lakh becomes ₹10 lakh in 20 years at 12%, but takes 40 years at 6%. This is why equity mutual funds (~12%) crush PPF (~7.1%) over 30-year horizons.
Compound interest vs simple interest
₹1 lakh at 10% for 10 years: simple interest = ₹2,00,000 (you earn ₹10k a year). Compound interest = ₹2,59,374 (gain of ₹59k extra because earlier interest also earns interest). The compounding edge gets dramatic at longer tenures — at 20 years the same money is ₹3,00,000 simple vs ₹6,72,750 compound.
Indian instruments and their compounding
- FD — quarterly (most banks), monthly payout option for income
- PPF — annually (use PPF calculator)
- NSC / KVP — annually
- RD — quarterly (use RD calculator)
- Equity SIP — continuously compounded (use SIP calculator)
FAQ
Why does the Rule of 72 work?
It's a math approximation: ln(2) ≈ 0.693, divided by typical interest rates gives near-exact doubling time for 6-10% rates. At 7.2%, money doubles in exactly 10 years.
Compound vs simple interest in real life?
FDs, mutual funds, PPF — all compound. Personal loans on flat rate (often quoted by NBFCs) are simple-interest formulas at higher effective rates. Always check effective annual cost.
Compounding frequency — does it matter?
Monthly > quarterly > annually for the depositor. The difference is small at low rates, big at high rates. 12% annual: 12% APR, but ~12.68% effective if compounded monthly.