Compound interest calculator
Compound interest adds each period's interest to the deposit, so the next period's interest is earned on the larger sum. Banks compound fixed deposits quarterly.
What a deposit grows to when interest is added to it and earns interest in turn
- Principal
- ₹1,00,000
- Interest earned
- ₹41,478
- Amount at the end
- ₹1,41,478
Value at each year end
- Principal
- Interest earned
What if
Interest added monthly
₹1,41,763
₹285 higher
5 more years
₹2,00,160
₹58,682 higher
1% more interest
₹1,48,595
₹7,117 higher
How it is worked out
Amount = principal × (1 + r ÷ m)^(m × t)
where r is the yearly rate, m the times interest is added in a year and t the years.
Tax deducted at source on interest is not taken off.
About compound interest calculator
The compound interest calculator works out what a sum grows to when each period's interest is added to it, so the next period earns interest on the larger amount. It takes a principal, a yearly rate, a number of years and how often interest is added.
The formula
The amount at the end is the principal × (1 + r ÷ m)^(m × t), where r is the yearly rate as a decimal, m is the number of times interest is added in a year and t is the number of years. The interest earned is that amount minus the principal.
A worked example
₹1,00,000 at 7% a year for 5 years, with interest added quarterly, has m = 4. Each quarter adds 7 ÷ 4 = 1.75%, and there are 20 quarters. 1.0175 raised to the power of 20 is 1.41478, so the amount is ₹1,41,478 and the interest earned is ₹41,478.
Simple interest on the same sum would be ₹35,000 over five years, because it is always charged on the original ₹1,00,000. The ₹6,478 gap is interest earned on earlier interest.
Compounding frequency
Frequency changes the result because interest added sooner starts earning sooner. At 7% for 5 years on ₹1,00,000, yearly addition gives ₹1,40,255, half-yearly ₹1,41,060, quarterly ₹1,41,478 and monthly ₹1,41,763.
Bank fixed deposits commonly add interest quarterly, which is why the calculator offers yearly, half-yearly, quarterly and monthly. Quarterly addition at 7% is an effective yearly rate of 7.19%. Schemes such as PPF add interest once a year.
Rate and time
Time sits in the exponent, so each extra year multiplies the amount again instead of adding a fixed sum. The page's what-if lines show each input's effect: five more years takes the example to ₹2,00,160, and 1% more interest takes it to ₹1,48,595.
Tax and other limits
The result is before tax. Tax deducted at source on interest is not taken off. Banks deduct it only when interest at one bank in a financial year passes ₹50,000 (₹1,00,000 for senior citizens), at 10% with a PAN, and the interest is taxable as income whether or not tax was deducted.
It also leaves out inflation, which reduces what the final amount buys, and it assumes the rate stays fixed for the whole period. A deposit with a changing rate, or regular additions as in a monthly SIP, needs a different calculation.