Free Compound Interest Calculator
Calculate compound interest with annual, quarterly, monthly, or daily compounding. See year-by-year growth and compare with simple interest.
What Is Compound Interest?
Compound interest is interest calculated on the initial principal and on all previously accumulated interest. In contrast, simple interest is calculated only on the principal.
Example: ₹10,000 invested at 10% for 3 years:
| Year | Simple Interest | Compound Interest |
|---|---|---|
| Year 1 | ₹10,000 + ₹1,000 = ₹11,000 | ₹10,000 + ₹1,000 = ₹11,000 |
| Year 2 | ₹11,000 + ₹1,000 = ₹12,000 | ₹11,000 + ₹1,100 = ₹12,100 |
| Year 3 | ₹12,000 + ₹1,000 = ₹13,000 | ₹12,100 + ₹1,210 = ₹13,310 |
The difference is ₹310 after 3 years. Over 20 years, that same ₹10,000 at 10%:
- Simple Interest: ₹30,000 (₹10,000 principal + ₹20,000 interest)
- Compound Interest: ₹67,275 — more than double!
The Compound Interest Formula
The standard compound interest formula:
Where:
- A = Final amount (principal + interest)
- P = Principal (initial investment)
- r = Annual interest rate (as a decimal, e.g., 10% = 0.10)
- n = Number of times interest compounds per year
- t = Time in years
Compound Interest = A − P
Example: ₹50,000 at 8% annual interest, compounded quarterly (n=4), for 5 years:
- A = 50,000 × (1 + 0.08/4)^(4×5)
- A = 50,000 × (1.02)^20
- A = 50,000 × 1.4859 = ₹74,297
- Compound Interest = ₹74,297 − ₹50,000 = ₹24,297
How Compounding Frequency Affects Returns
The more frequently interest compounds, the more you earn. Here's ₹1,00,000 at 12% annual rate for 10 years:
| Compounding | n value | Final Amount | Total Interest |
|---|---|---|---|
| Annual | 1 | ₹3,10,585 | ₹2,10,585 |
| Semi-annual | 2 | ₹3,20,714 | ₹2,20,714 |
| Quarterly | 4 | ₹3,26,204 | ₹2,26,204 |
| Monthly | 12 | ₹3,30,039 | ₹2,30,039 |
| Daily | 365 | ₹3,31,946 | ₹2,31,946 |
Bank FDs in India typically compound quarterly. Most mutual funds compound daily via NAV appreciation. SIPs compound through reinvestment. Use our SIP Calculator for SIP-specific projections.
The Rule of 72 — Mental Math Shortcut
The Rule of 72 lets you quickly estimate how long it takes to double your money:
| Interest Rate | Years to Double | Real-world example |
|---|---|---|
| 6% | 12 years | PPF (7.1%) → ~10 years |
| 8% | 9 years | FD at 8% → 9 years |
| 12% | 6 years | Equity mutual fund (long-term avg) |
| 15% | 4.8 years | Aggressive equity / small cap |
| 18% | 4 years | Exceptional stock returns |
Inflation works the other way: at 6% inflation, the value of ₹1 lakh halves in 12 years. Your investment return must beat inflation to grow real wealth.
How to Use the Tool (Step by Step)
- 1
Open the Compound Interest Calculator
Go to ToolsArena Compound Interest Calculator — no login needed.
- 2
Enter your principal amount
Type the initial investment or deposit amount in rupees.
- 3
Enter the interest rate
Enter the annual interest rate as a percentage (e.g., 8 for 8%).
- 4
Set the time period and compounding frequency
Enter the number of years and select how often interest compounds (annually, quarterly, monthly, daily).
- 5
Read the results
See the final amount, total interest earned, and a year-by-year growth chart.
Frequently Asked Questions
What is the compound interest on ₹1 lakh for 5 years at 10%?+−
Using A = P×(1+r)^t: A = 1,00,000 × (1.10)^5 = 1,00,000 × 1.6105 = ₹1,61,051. Compound Interest = ₹61,051. In comparison, simple interest would give only ₹50,000.
What is the difference between compound interest and simple interest?+−
Simple interest is calculated only on the principal each year. Compound interest is calculated on the principal plus all previously earned interest. Over long periods, the difference is enormous — a ₹1 lakh investment at 10% for 30 years earns ₹3 lakh in simple interest but over ₹17 lakh in compound interest.
Which bank FDs offer the highest compound interest in India?+−
As of 2026, small finance banks like Unity Small Finance Bank, Suryoday, and Jana Small Finance Bank offer 8.5–9.5% on FDs. Large banks like SBI, HDFC, ICICI offer 6.5–7.5%. Senior citizens typically get 0.25–0.5% extra. Use ToolsArena's FD Calculator to compare returns.
How is compound interest calculated in SIP mutual funds?+−
SIPs don't use a fixed compound interest rate — returns depend on market performance (NAV). The calculation uses CAGR (Compound Annual Growth Rate) or XIRR for irregular cash flows. For SIP return projections, use our SIP Calculator which uses an assumed annual return rate to show projected corpus.
Does compound interest apply to loan EMIs?+−
Yes, but it works against you on loans. Banks calculate interest daily or monthly on your outstanding balance. This is why the total interest paid on a 20-year home loan can exceed the principal. Use the EMI Calculator to see the full repayment schedule and total interest cost.
Free Compound Interest Calculator
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