Compound Interest Calculator
Calculate compound interest over time for Indian bank deposits
Discover the power of compound interest - where your interest earns interest. See how your money grows exponentially with different compounding frequencies.
Calculate Returns
💡 Tip: More frequent compounding (daily vs yearly) results in higher returns!
Understanding Compound Interest
What is Compound Interest?
Compound interest is the interest calculated on the initial principal, which also includes all the accumulated interest from previous periods. It's often called "interest on interest."
- Your money grows exponentially, not linearly
- Time is your best friend - the longer you invest, the more you earn
- Used by banks, fixed deposits, and many investment schemes
Indian Bank Applications
Most Indian banks use compound interest for various savings and investment products:
- Fixed Deposits: Typically quarterly compounding at 5-7.5% p.a.
- Recurring Deposits: Monthly contributions with quarterly compounding
- Savings Accounts: Daily/Quarterly compounding at 3-4% p.a.
- Post Office Schemes: Various products with annual/quarterly compounding
Compounding Frequencies
Key Benefits
- Exponential Growth: Your wealth grows faster over time
- Passive Income: Earn money without any effort
- Wealth Building: Perfect for long-term financial goals
- Beat Inflation: Compound returns help maintain purchasing power
The Formula
This calculator uses the compound interest formula to calculate the final amount:
A = P × (1 + r/n)^(n×t) Effective Annual Rate: The calculator also shows the effective annual rate (EAR), which is the actual rate you earn considering the compounding effect: (1 + r/n)^n - 1
Start Growing Your Wealth Today
Use our other calculators to plan your complete financial journey
Why Our Compound Interest Calculator Stands Out
Multiple Compounding Frequencies
Calculate compound interest with daily, monthly, quarterly, half-yearly, or yearly compounding. See exactly how frequency impacts your returns.
Detailed Breakdown
View comprehensive results showing principal, interest earned, total amount, and effective annual rate (EAR) for accurate planning.
Indian Bank Rates
Tailored for Indian investors with relevant bank FD rates, post office schemes, and typical interest rates used across financial products.
How to Use the Compound Interest Calculator
Enter Principal Amount
Input the initial amount you plan to invest or deposit. This is your starting capital before any interest is applied.
Set Interest Rate and Time Period
Enter the annual interest rate (as offered by your bank or scheme) and the duration in years you plan to keep the money invested.
Choose Compounding Frequency
Select how often interest is compounded - daily, monthly, quarterly, half-yearly, or yearly. More frequent compounding means higher returns.
View Detailed Results
See your total maturity amount, interest earned, and effective annual rate. Compare different scenarios by adjusting the parameters.
Frequently Asked Questions
What is compound interest and how does it work?
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, compound interest grows exponentially because you earn "interest on interest." This makes it one of the most powerful concepts in investing.
How does compounding frequency affect my returns?
The more frequently interest is compounded, the higher your returns. For example, daily compounding (365 times/year) will give you more returns than yearly compounding (1 time/year) for the same interest rate. The difference becomes more significant over longer time periods.
What is the difference between nominal and effective interest rate?
The nominal rate is the stated annual interest rate, while the effective annual rate (EAR) accounts for compounding. For example, 6% compounded quarterly has a nominal rate of 6% but an effective rate of 6.14%. Our calculator shows both rates for complete transparency.
Which Indian banks offer the best compound interest rates?
Fixed deposit rates vary by bank and tenure. Currently, most banks offer 5-7.5% for FDs (quarterly compounding). Small finance banks often provide higher rates (7-9%). Post office schemes like PPF offer around 7.1% annually. Always compare rates before investing.
How long should I invest to benefit from compound interest?
Compound interest works best over longer periods. The exponential growth becomes more visible after 5-10 years. For retirement planning, investing for 20-30 years can turn modest investments into substantial wealth. Start early to maximize the compounding effect.
Is compound interest taxable in India?
Yes, interest income is taxable in India. For fixed deposits, TDS is deducted if interest exceeds ₹40,000/year (₹50,000 for senior citizens). The interest is added to your income and taxed as per your tax slab. However, some instruments like PPF offer tax-free returns under EEE status.