Compound interest calculator
What does this grow to, and how much of it is interest on interest?
Indian bank deposits compound quarterly. The more often it compounds, the more the same rate is worth.
₹11,04,020after 10 years
- Interest earned
- ₹6,04,020
- Effective annual rate
- 8.2%
- Simple interest would give
- ₹9,00,000
- Compounding gains you
- ₹2,04,020
The same money compounded monthly instead would reach ₹11,09,820.
- Principal
- Interest
| Year | Principal | Interest so far | Balance |
|---|---|---|---|
| 1 | ₹5,00,000 | ₹41,216 | ₹5,41,216 |
| 2 | ₹5,00,000 | ₹85,830 | ₹5,85,830 |
| 3 | ₹5,00,000 | ₹1,34,121 | ₹6,34,121 |
| 4 | ₹5,00,000 | ₹1,86,393 | ₹6,86,393 |
| 5 | ₹5,00,000 | ₹2,42,974 | ₹7,42,974 |
| 6 | ₹5,00,000 | ₹3,04,219 | ₹8,04,219 |
| 7 | ₹5,00,000 | ₹3,70,512 | ₹8,70,512 |
| 8 | ₹5,00,000 | ₹4,42,270 | ₹9,42,270 |
| 9 | ₹5,00,000 | ₹5,19,944 | ₹10,19,944 |
| 10 | ₹5,00,000 | ₹6,04,020 | ₹11,04,020 |
Compound interest is interest that starts earning interest. Put money somewhere at a fixed rate and leave it, and the balance does not climb in a straight line — each period's interest is charged on a slightly bigger number than the last. This works out what a lump sum becomes, and splits the answer into the money you put in, the interest a plain non-compounding account would have paid, and the extra that only exists because the interest was left in place.
A worked example
Take ₹5,00,000 at 8% for 10 years, compounded quarterly — a plausible bank fixed deposit, and the four values the calculator above opens with.
Quarterly means the rate is applied 40 times: 2% of the balance, every three months. The balance reaches ₹11,04,020. Of that, ₹5,00,000 is your own money and ₹6,04,020 is interest — the money has more than doubled.
The same ₹5,00,000 at the same 8% for the same ten years without compounding would pay ₹40,000 a year, ₹4,00,000 in all, and hand back ₹9,00,000. So ₹2,04,020 of the final balance exists for one reason only: the interest was never withdrawn, so it earned interest of its own. That gap is small in year one (₹41,216 of interest) and does most of its work at the end — the tenth year alone adds ₹84,076, more than twice what the first year did.
| Monthly | Quarterly | Half-yearly | Yearly | |
|---|---|---|---|---|
| Final balance | ₹11,09,820 | ₹11,04,020 | ₹10,95,562 | ₹10,79,462 |
| Interest earned | ₹6,09,820 | ₹6,04,020 | ₹5,95,562 | ₹5,79,462 |
| Effective annual rate | 8.3% | 8.2% | 8.2% | 8% |
One rate, four conventions. Switching the frequency selector above reproduces each column — the difference between the best and worst of them is ₹30,358 on the same deposit at the same quoted rate.
What this number does not account for
Tax, which is not small
Interest is taxed at your slab rate and the bank deducts TDS under Section 194A once its yearly interest to you crosses the threshold. A 30%-slab depositor pays 31.2% on it once the 4% health and education cess is counted, so an 8% deposit nets about 5.5%.
A rate that stays put for ten years
The formula assumes one rate for the whole term. A fixed deposit does hold its rate to maturity, but reinvesting at maturity happens at whatever is on offer then — not at 8%.
Inflation
This is a rupee figure, not purchasing power. Money that grows 8% a year while prices rise 6% is gaining about 2% in real terms, and the table shows none of that.
Anything market-linked
Equity, mutual funds and NPS have no compounding frequency and no rate to enter. Use this only where a rate is contractual — FDs, PPF, NSC, bonds, EPF at the rate EPFO declares each year.
Three more things it is silent on. Premature withdrawal: break a fixed deposit early and most banks pay a rate below the card rate for the period the money actually stayed, less a penalty they publish in their deposit schedule, and the compounding you modelled never happens — check your bank’s published penalty. Payout deposits: if the interest is credited to your savings account every quarter rather than added to the deposit, there is no compounding at all and the honest comparison is the simple-interest figure. Scheme caps: PPF takes at most ₹1.5 lakh a year and Sukanya Samriddhi the same. That ceiling is set by each scheme’s own rules, not by the Section 80C deduction limit that happens to be the same figure, and it is a ceiling on the deposit rather than on the maths: a large lump sum cannot simply be parked at a small-savings rate.
Rates, thresholds and penalties are all checkable: small-savings rates are notified quarterly by the Ministry of Finance, the EPF rate is declared annually by EPFO, and the TDS threshold and slab rates are in the Income-tax Act. Enter the rate your own document states rather than a remembered one.
Where to go next
- Simple interest — the same money with the interest taken out each period, which is the ₹9,00,000 line above.
- Fixed deposit — the same maths with the bank’s quarterly convention fixed and maturity handled for you, if a specific FD is what you are pricing.
- SIP — for money added every month rather than once, where each instalment compounds for a different length of time.
What is the formula for compound interest?
A = P × (1 + r/n)^(n×t), where P is the amount you start with, r is the annual rate as a decimal, n is how many times a year it compounds, and t is the number of years. The interest earned is A − P. That is exactly the formula this calculator runs; the only thing the tool adds is the year-by-year table.
How often do Indian bank deposits compound?
Quarterly, on almost every fixed and recurring deposit — that is the banking convention, which is why quarterly is the setting this page opens on. Small savings schemes differ: PPF and Sukanya Samriddhi are compounded annually, and NSC annually as well, under the Ministry of Finance's small-savings terms. Check which one your product uses before comparing two headline rates, because the same number is worth more compounded four times a year than once.
Why is the effective rate higher than the rate I was quoted?
The quoted rate is nominal — an annual rate divided up across the compounding periods. The effective annual rate is what you actually earn once each period's interest starts earning too. At 8% nominal, quarterly compounding gives an effective 8.2% a year and monthly gives 8.3%. Nominal rates are only comparable between two products that compound at the same frequency; effective rates are always comparable.
Is the interest shown here what I will receive?
No — it is before tax, and interest is taxable. Bank interest is added to your total income and taxed at your slab rate, and the bank deducts TDS at source once the interest it pays you in a year crosses the threshold in Section 194A of the Income-tax Act. What lands in your account is the figure here minus your tax.
Does compound interest work the same way on a loan?
The mechanics are the same but the direction is not: on a loan you are the one paying interest on a balance, and you also make monthly payments that cut that balance down. Use the EMI calculator for borrowing — modelling a home loan as a compounding lump sum will overstate what you owe badly.
This page starts from typical figures. In Hundo the same calculator opens on your own — the loan, the deposit, the salary already on the ledger — and says where each number came from.