Compound Interest Calculator

What compound interest means

Compound interest is interest earned on both your original deposit and the interest already added. Over short periods it looks similar to simple interest, but over many years the difference becomes large. The more often interest is compounded (yearly, quarterly, monthly), the faster the balance grows.

The formula

A = P × (1 + r ÷ n)^{n × t}

• P is the starting amount, r is the annual rate as a decimal, n is the number of times interest compounds per year and t is the number of years.

Worked example

Deposit ₹1,00,000 at 8% for 5 years. Compounded yearly, it grows to ₹1,46,933. Compounded quarterly it reaches about ₹1,48,595. With simple interest the same deposit would only reach ₹1,40,000, so compounding adds nearly ₹7,000 here, and the gap widens every additional year.

Practical takeaways

• Time matters more than rate. Doubling the period usually adds more than raising the rate a little.
• The Rule of 72 gives a quick estimate: divide 72 by the annual rate to get the years needed to double your money. At 8% that is about 9 years.
• The same math works against you on debt. Credit-card balances compound at high rates, which is why unpaid balances grow quickly.

Frequently asked questions

What is the difference between compound and simple interest?

Simple interest is calculated only on the original amount. Compound interest is calculated on the growing balance, so it accelerates over time.

Is the result before or after tax?

The result is before tax. Interest on many deposits is taxable, so your actual take-home growth will be lower.