Compound Interest Calculator

Compound interest is interest that itself earns interest. In year one your money earns a return on the principal; in year two it earns a return on the principal plus the year-one return, and so on. Over short periods the difference against simple interest looks trivial. Over twenty or thirty years it is the difference between a modest sum and a life-changing one.

This calculator handles a single lump sum: money you have today, left untouched for a fixed number of years. Use it to project a PPF balance, an FD maturity, the value of a one-time mutual fund purchase, or simply to answer the question "what is ₹5 lakh worth in twenty years?" If you invest a fixed amount every month instead, use the SIP calculator.

The compound interest formula

A = P × (1 + r/n)^n×t

• P = principal, the starting amount
• r = annual interest rate as a decimal, so 8% is 0.08
• n = number of times interest is compounded per year
• t = number of years

The interest earned is simply A − P. Notice that time sits in the exponent while the rate sits in the base. That asymmetry is the whole story of compounding: extending the horizon does far more than raising the rate.

Simple vs compound, year by year

Simple interest is calculated only on the original principal, so it grows in a straight line. Compound interest curves upward. Here is ₹1,00,000 at 8% a year under both.

After one year the two are identical. After ten years compounding is ahead by ₹35,892, roughly a third of the original principal. Extend the same deposit to twenty years and the compound value reaches ₹4,66,096 against ₹2,60,000 under simple interest. At thirty years it is ₹10,06,266 against ₹3,40,000 — nearly three times as much.

The Rule of 72

Divide 72 by the annual return and you get, to a very good approximation, the number of years your money takes to double. It is accurate enough for mental arithmetic anywhere between 5% and 15%.

The rule works in reverse too, and that is where it earns its keep. At 6% inflation, prices double in twelve years — so a ₹50,000 monthly expense today becomes ₹1,00,000 by 2038. Any retirement plan built on today's prices without that adjustment is understating the target by half.

Does compounding frequency matter?

It matters, but less than most people expect. Here is ₹1,00,000 at 8% for 5 years under four different frequencies.

Moving from annual to monthly compounding adds ₹2,052 over five years, about 4% more interest. Real, but a rate difference of half a percentage point would have mattered more. The practical use of this table is comparison: when one bank quotes 8% compounded quarterly and another quotes 8.2% compounded annually, convert both to the effective annual yield before deciding. The first is 8.243%, so it wins.

Three worked examples

1. ₹1,00,000 at 8% for 10 years, compounded annually

A = 1,00,000 × 1.08¹⁰ = ₹2,15,892. Interest earned is ₹1,15,892 — more than the principal itself. This is roughly what a decade in a good corporate bond fund or a long FD ladder might look like before tax.

2. ₹5,00,000 at 12% for 20 years

A = 5,00,000 × 1.12²⁰ = ₹48,23,147. A single ₹5 lakh investment left alone for twenty years at an equity-like return becomes over ₹48 lakh. Nothing was added along the way; the entire ₹43,23,147 of growth came from not touching it.

3. A PPF account: ₹1,50,000 a year for 15 years at 7.1%

PPF compounds annually and is credited at the end of each financial year. Depositing the full ₹1,50,000 limit before 5 April each year for the mandatory fifteen-year term gives a maturity value of about ₹40,68,209 on ₹22,50,000 of contributions — ₹18,18,209 of it interest, entirely tax-free. Extend the account in five-year blocks and by year 25 the balance crosses ₹1 crore.

Where compounding applies in India

Rates below are as of September 2026. Small savings rates are reviewed every quarter by the Ministry of Finance and have now been left unchanged for nine consecutive quarters.

Two of these deserve emphasis. PPF is the only widely available instrument in India offering exempt-exempt-exempt treatment: the contribution is deductible under the old regime, the interest is tax-free, and the maturity amount is tax-free. At 7.1% tax-free it beats a 10% taxable FD for anyone in the 30% slab. EPF at 8.25% is quietly the best fixed-income return most salaried Indians will ever get, which is a strong argument against withdrawing it when you change jobs — transfer it instead.

Mutual funds do not literally compound; the NAV simply rises and falls. But because gains stay invested and are not taxed until you redeem, the effect is identical to compounding, and the deferral of tax makes it slightly better than a comparable FD even at the same headline return.

Common mistakes

• Ignoring inflation. ₹1 crore in thirty years, at 6% inflation, buys roughly what ₹17 lakh buys today. Always check whether your target is in today's rupees or tomorrow's.
• Comparing pre-tax returns with tax-free ones. A 7.1% PPF return is equivalent to about 10.3% pre-tax for someone in the 30% bracket. Compare like with like.
• Interrupting the compounding. Withdrawing and restarting resets the exponent. The final years of any compounding curve contribute the most growth, and they only exist if you stay invested through the earlier ones.
• Assuming the same rate forever. Small savings rates are reset quarterly and FD rates change with the rate cycle. Treat any long projection as a scenario, not a forecast.
• Forgetting that compounding works against you on debt. Credit card outstandings compound monthly at 36% to 48% a year, which doubles the balance in under two years.