Compound Interest Calculator
Work out how a lump sum grows over time when interest is compounded on both the original principal and the interest already earned, at annual, half-yearly, quarterly or monthly compounding frequency.
Fill in the form and select "Calculate" to see your results here.
What is compound interest?
Compound interest is interest calculated not only on the original principal you invest, but also on all the interest that has already accumulated in previous periods. Each time interest is added to your balance, the next period's interest is calculated on that larger balance — so your money earns "interest on interest," and the growth curve gets steeper the longer the money stays invested. This is different from simple interest, which is calculated only on the original principal for every period and grows at a constant amount each year.
How often that interest gets added to your balance — the compounding frequency — also matters. At the same nominal annual rate, compounding monthly adds interest to your balance twelve times a year instead of once, so each addition starts earning further interest sooner. This produces a slightly higher effective return than annual compounding at the same quoted rate, even though the nominal rate hasn't changed.
How to use this calculator
- Enter the principal amount — the lump sum you're investing or depositing today.
- Enter the annual interest rate you expect to earn, assumed to stay fixed for the entire period.
- Enter the number of years the money will stay invested.
- Select the compounding frequency. This should match how often interest is actually credited on the instrument you're modelling — for example, most Indian bank FDs compound quarterly, while some funds or bonds compound monthly or annually. Check the terms of your specific instrument if you're unsure.
Formula
The term r/n is the interest rate applied per compounding period, and n × t is the total number of compounding periods over the full tenure. Raising (1 + r/n) to that many periods captures the effect of interest earning further interest at every step.
Example
Consider a principal of ₹1,00,000 invested at 8% per annum for 5 years, compounded quarterly. Here P = ₹1,00,000, r = 0.08, n = 4, and t = 5, so the maturity value works out to approximately ₹1,48,594.74, with total interest earned of approximately ₹48,594.74 over the 5-year period. If the same ₹1,00,000 at the same 8% rate were compounded annually instead of quarterly, the maturity value after 5 years would come out slightly lower than ₹1,48,594.74, since interest would only be added to the balance once a year instead of four times a year.
Factors that affect the result
- Compounding frequency. More frequent compounding (monthly or quarterly versus annually) produces a marginally higher maturity value at the same nominal rate, because interest starts earning further interest sooner.
- Accuracy of the rate assumption. This calculator assumes the interest rate you enter stays fixed for the entire tenure. If you're modelling a market-linked investment, actual returns will vary year to year rather than compounding smoothly at one fixed rate.
- Fixed-rate versus market-linked instruments. Only fixed-rate instruments such as bank deposits or bonds held to maturity genuinely lock in a contractual rate for the full tenure. For mutual funds, stocks, or other market-linked investments, treat any rate you enter here as an assumption for projection purposes, not a guaranteed outcome.
- Time period. Compounding has the biggest visible effect over longer tenures — the gap between compound and simple interest widens the longer the money stays invested.
Frequently Asked Questions
More frequent compounding means interest gets added to your balance more often, so each addition starts earning further interest sooner. At the same nominal annual rate, monthly compounding produces a slightly higher maturity value than quarterly compounding, which in turn produces a slightly higher value than annual compounding. The difference is usually modest for typical rates and tenures, but it grows with higher rates and longer periods.
They use the same underlying compound interest formula, but this calculator is a general-purpose tool for any lump sum growing at a fixed rate, while the FD calculator is built specifically for bank fixed deposits and adds FD-specific context such as premature withdrawal penalties and TDS on interest. Use the FD calculator when you're modelling an actual bank fixed deposit.
Simple interest is calculated only on the original principal for every period, so it grows at a constant amount each year. Compound interest is calculated on the principal plus all interest accumulated so far, so the amount it adds keeps increasing each period. Over long tenures or high rates, compound interest produces a noticeably larger total than simple interest at the same nominal rate.
Not necessarily. Moving from annual to quarterly or monthly compounding does increase the maturity value, but for typical interest rates and moderate tenures the difference is usually small in percentage terms. The interest rate and the tenure itself generally have a much larger effect on your final amount than the compounding frequency does.
You can use it for any scenario where you're modelling a fixed, unchanging rate of return, such as a bank deposit or a bond held to maturity. It is not suitable for market-linked instruments like mutual funds or stocks, whose actual returns fluctuate and are never guaranteed at a fixed rate — for those, treat any rate you enter here as an assumption, not a promise.
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Calculations are estimates based on the information entered and assume the interest rate and compounding frequency stay fixed for the full period. Actual returns on market-linked investments will vary and are never guaranteed; only fixed-rate instruments such as bank deposits contractually lock in a rate. This tool is not financial advice. See our full disclaimer.