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Compound Interest Calculator India 2025

Discover the magic of compound interest and watch your money grow exponentially.

Compound Interest Calculator
₹

The initial amount you invest

%

Expected annual return rate

How often interest is calculated

years

How long you will keep the money invested

Compound Interest Formula

A = P(1 + r/n)^(nt)

A = Final Amount (₹0)

P = Principal (₹100,000)

r = Annual Interest Rate (8% = 0.080)

n = Compounding Frequency (1 times per year)

t = Time Period (10 years)

Compound Interest Results

Enter your investment details to see how compound interest works

Year-wise Compound Interest Schedule

Detailed breakdown showing how your investment grows each year. Notice how the interest earned increases year by year due to compounding.

Compound Interest Calculation Formulas

Understand the mathematical formulas used to calculate compound interest and investment growth over time.

1

Compound Interest Formula

The standard formula to calculate the final amount with compound interest.

A = P(1 + r/n)^(nt)

Example:

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

1,00,000 × (1 + 0.08/1)^(1×10)
= ₹2,15,892

Variables:

A - Final amount after compound interest
P - Principal amount (initial investment)
r - Annual interest rate (as decimal)
n - Compounding frequency per year
t - Time period in years
2

Interest Earned Calculation

Calculate the total interest earned through compounding.

Interest Earned = Final Amount - Principal Amount

Example:

For ₹1,00,000 growing to ₹2,15,892

2,15,892 - 1,00,000
= ₹1,15,892

Variables:

Final Amount - Total amount after compound interest
Principal Amount - Initial investment amount
3

CAGR (Compound Annual Growth Rate)

Calculate the annual growth rate that would give the same final result.

CAGR = ((Final Amount / Principal)^(1/t)) - 1

Example:

For ₹1,00,000 growing to ₹2,15,892 in 10 years

((2,15,892 / 1,00,000)^(1/10)) - 1
= 8% CAGR

Variables:

Final Amount - Total amount after investment period
Principal - Initial investment amount
t - Investment period in years

These formulas provide the mathematical foundation for the calculations. Actual results may vary based on rounding, compounding frequency, and specific lender policies.

Compounding Frequency Impact

See how different compounding frequencies affect your returns

Investment Instruments with Compound Interest in India

Various investment options that offer compound interest growth

Fixed Deposits (FD)

  • • Interest: 5-8% per annum
  • • Tenure: 7 days to 10 years
  • • Risk: Very low
  • • Compounding: Quarterly
  • • Tax: Fully taxable

Recurring Deposits (RD)

  • • Interest: 5-8% per annum
  • • Tenure: 6 months to 10 years
  • • Risk: Very low
  • • Compounding: Quarterly
  • • Investment: Monthly SIP

Public Provident Fund (PPF)

  • • Interest: 7.1% per annum (current)
  • • Tenure: 15 years (extendable)
  • • Risk: Government guaranteed
  • • Compounding: Annual
  • • Tax: EEE status

National Savings Certificate (NSC)

  • • Interest: 6.8% per annum
  • • Tenure: 5 years
  • • Risk: Government backed
  • • Compounding: Annual
  • • Tax: 80C deduction

Debt Mutual Funds

  • • Returns: 6-9% per annum
  • • Tenure: No lock-in
  • • Risk: Low to moderate
  • • Compounding: NAV growth
  • • Tax: LTCG after 3 years

ELSS (Tax Saving Funds)

  • • Returns: 10-15% per annum
  • • Tenure: 3 year lock-in
  • • Risk: Market linked
  • • Compounding: NAV growth
  • • Tax: 80C + LTCG benefits

Smart Investment Tips

Diversify across multiple instruments to balance risk and returns
Start early to maximize the power of compound interest over time
Consider tax implications and choose tax-efficient instruments

Compound Interest Calculator FAQs

Everything you need to know about compound interest, investment growth, and wealth building strategies

What is compound interest and how does it work?

Compound interest is when you earn interest not only on your original principal amount but also on previously earned interest. This creates a snowball effect where your money grows exponentially over time. For example, if you invest ₹1,00,000 at 8% annual interest compounded annually, after one year you'll have ₹1,08,000. In the second year, you'll earn 8% on ₹1,08,000, not just the original ₹1,00,000.

What's the difference between simple and compound interest?

Simple interest is calculated only on the principal amount, while compound interest is calculated on both principal and accumulated interest. For example, ₹10,000 at 10% for 10 years gives ₹20,000 with simple interest but ₹25,937 with compound interest - a difference of ₹5,937!

How does compounding frequency affect my returns?

Higher compounding frequency means better returns. Daily compounding gives slightly higher returns than monthly, which is better than quarterly or annual. However, the difference is usually small - for ₹1 lakh at 8% for 10 years: annual compounding gives ₹2.16 lakh while daily compounding gives ₹2.23 lakh.

When should I start investing to maximize compound interest?

Start as early as possible! Time is the most powerful factor in compounding. Starting at 25 vs 35 can result in 2-3x more wealth by retirement. Even investing ₹5,000/month from age 25-35 (₹6 lakh total) can outperform investing ₹10,000/month from 35-65 (₹36 lakh total) due to compounding.

What are the best investment options for compound growth?

Equity mutual funds, PPF, ELSS, and index funds are excellent for long-term compound growth. Equity investments historically provide 10-12% annual returns, while debt instruments like PPF provide 7-8%. The key is consistency and long-term investment horizon.

How accurate is this compound interest calculator?

Our calculator uses standard mathematical formulas and is highly accurate for projections. However, actual investment returns can vary due to market volatility, fees, taxes, and other factors. Use it as a planning tool, not a guarantee of returns.

Should I invest lump sum or through SIP for better compounding?

Both have benefits. Lump sum gives more time for compounding but requires market timing. SIP provides rupee cost averaging and builds discipline. Generally, SIP is recommended for most investors as it reduces risk and makes investing manageable.

How does inflation affect compound interest?

Inflation reduces the real value of your returns. If you earn 8% but inflation is 6%, your real return is only 2%. That's why it's important to invest in assets that historically beat inflation, like equity markets which have averaged 10-12% over long periods.

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