How to use the Compound Interest Calculator
- Enter the principal, the amount you start with.
- Enter the yearly interest rate.
- Enter the time in years, using decimals for part years.
- Choose how often interest is compounded and read the final amount and interest earned.
Formula used
A = P × (1 + r ÷ n)^(n × t), and compound interest = A − P, where P is the principal, r is the yearly rate as a decimal, n is the compounding periods per year and t is the time in years.
Worked example
Here is the Compound Interest Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Principal amount | ₹50,000 |
| Interest rate (per year) | 8 % |
| Time period | 10 years |
| Compounding | Yearly |
| Result | |
| Final amount | ₹1,07,946 |
| Principal | ₹50,000 |
| Compound interest | ₹57,946 |
Year-by-year growth
Balance at the end of each year for the default inputs, with interest compounding at the chosen frequency.
| Year | Balance | Interest earned so far |
|---|---|---|
| 1 | ₹54,000 | ₹4,000 |
| 2 | ₹58,320 | ₹8,320 |
| 3 | ₹62,986 | ₹12,986 |
| 4 | ₹68,024 | ₹18,024 |
| 5 | ₹73,466 | ₹23,466 |
| 6 | ₹79,344 | ₹29,344 |
| 7 | ₹85,691 | ₹35,691 |
| 8 | ₹92,547 | ₹42,547 |
| 9 | ₹99,950 | ₹49,950 |
| 10 | ₹1,07,946 | ₹57,946 |
How compound interest works
The final amount is A = P × (1 + r ÷ n)^(n × t), and the compound interest is A − P. With ₹50,000 at 8% for 10 years, compounded yearly, the final amount is ₹1,07,946, so the interest earned is ₹57,946. Each year’s interest is added to the balance, so the next year’s interest is calculated on a larger amount.
The interest earned does not grow in a straight line. At the same rate, 20 years instead of 10 years raises the final amount to ₹2,33,048, and the interest rises from ₹57,946 to ₹1,83,048, more than three times as much.
Compounding frequency compared
For ₹50,000 at 8% over 10 years, yearly compounding gives ₹1,07,946, half-yearly gives ₹1,09,556, quarterly gives ₹1,10,402, monthly gives ₹1,10,982 and daily gives ₹1,11,267. Moving from yearly to monthly adds about ₹3,036, while moving from monthly to daily adds only about ₹285.
More frequent compounding always helps a little, but the gain shrinks as the frequency rises. The rate and the time you stay invested matter much more.
Compound versus simple interest, and the rule of 72
With simple interest the same ₹50,000 at 8% for 10 years earns ₹40,000, for a total of ₹90,000. Compounding yearly gives ₹1,07,946 instead, so you earn about ₹17,946 more. The gap widens every year.
A quick way to estimate doubling time is the rule of 72: divide 72 by the yearly rate. At 8%, money doubles in about 9 years. Check it with the calculator: ₹50,000 compounded yearly at 8% for 9 years comes to about ₹99,950, very close to ₹1,00,000.
Frequently asked questions
What is the compound interest formula?
A = P × (1 + r ÷ n)^(n × t), where P is the principal, r is the yearly rate as a decimal, n is the number of compounding periods per year and t is the time in years. Compound interest is A − P.
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus the interest already added, so it grows faster over time.
Does more frequent compounding earn more interest?
Yes, but by a shrinking amount. On ₹50,000 at 8% for 10 years, monthly compounding earns about ₹3,036 more than yearly, while daily earns only about ₹285 more than monthly.
How do I calculate compound interest for months?
Convert months to years by dividing by 12. For 18 months, enter 1.5 years. The calculator then applies the compounding frequency you selected.
Where is compound interest used?
Bank savings and fixed deposits, recurring investments, many loans and credit cards, and long-term investments all use compounding, either for you or against you when you borrow.
Does the calculator include tax?
No. Results are before tax. Interest income may be taxable depending on the product and your income, so check the current rules.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.