MonexMintMONEX MINT

Compound Interest Calculator

Calculate compound interest with different compounding frequencies. See how daily, monthly, quarterly, or annual compounding affects your returns.

Investment Details

₹
Initial investment
%
Expected annual return
years
🔢

Enter details to calculate compound interest

About Compound Interest

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Einstein reportedly called it "the eighth wonder of the world" because of its exponential growth power.

Formula

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

  • A = Maturity Amount
  • P = Principal
  • r = Annual Rate (decimal)
  • n = Compounding Frequency (per year)
  • t = Time (years)

Compounding Frequencies

  • Annually (n=1): Interest added once per year (PPF, NSC)
  • Half-Yearly (n=2): Interest added twice per year
  • Quarterly (n=4): Interest added 4 times per year (FD default)
  • Monthly (n=12): Interest added 12 times per year (most loans)
  • Daily (n=365): Interest added daily (savings accounts)

Impact of Compounding Frequency

Example: ₹1,00,000 at 8% for 10 years

  • Annual: ₹2,15,892
  • Quarterly: ₹2,20,804
  • Monthly: ₹2,21,964
  • Daily: ₹2,22,544

Higher frequency = Higher returns (but difference is small)

What this compound interest calculator does

Compound interest is the foundational concept of long-term wealth — the principle that earned interest itself starts earning interest, producing exponential rather than linear growth. The MONEX MINT compound interest calculator computes the maturity amount and total interest on any lumpsum investment under daily, monthly, quarterly, half-yearly or annual compounding, and shows the effective annual rate (EAR) for clean comparison across instruments. Use it for FDs, RDs, debt funds, corporate deposits, or to grasp why starting a SIP in your twenties is so powerful.

How it's calculated

A = P × (1 + r/n)^(nt)
Compound Interest = A − P
Effective Annual Rate (EAR) = (1 + r/n)^n − 1
  • A — Maturity amount — principal plus all compounded interest
  • P — Principal — your initial lumpsum investment
  • r — Nominal annual interest rate as a decimal (10% → 0.10)
  • n — Compounding frequency: 1 annual, 2 half-yearly, 4 quarterly, 12 monthly, 365 daily
  • t — Tenure in years

Example: ₹1,00,000 invested at 10% for 10 years (monthly compounding)

  1. Principal P = ₹1,00,000 | Rate r = 10% = 0.10 | Tenure t = 10 years | n = 12 (monthly)
  2. A = 1,00,000 × (1 + 0.10/12)^(12×10)
  3. A = 1,00,000 × (1.00833)^120
  4. A = 1,00,000 × 2.7070 = ₹2,70,704
  5. Compound interest earned = ₹2,70,704 − ₹1,00,000 = ₹1,70,704
  6. For comparison, simple interest would have given just ₹1,00,000 × 10% × 10 = ₹1,00,000 of interest
  7. Effective annual rate = (1 + 0.10/12)^12 − 1 = 10.47% (vs nominal 10%)

Result: Maturity: ₹2,70,704 | Compound interest: ₹1,70,704 | Effective annual rate: 10.47%

Frequently asked questions

What is the formula for compound interest?
Compound interest follows A = P × (1 + r/n)^(nt), where A is the maturity amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the time in years. Compound interest = A − P. The more frequently interest compounds, the higher the effective annual yield, though the difference between monthly and daily compounding is usually under 0.05%.
How is compound interest different from simple interest?
Simple interest is calculated only on the original principal (SI = P × r × t), so it grows linearly with time. Compound interest is calculated on the principal plus accumulated interest, so it grows exponentially. Over short periods (1-2 years) the difference is small. Over 20-30 years it is enormous — ₹1 lakh at 10% becomes ₹3 lakh under simple interest, but ₹6.7 lakh under annual compounding.
Does compounding frequency really matter?
Yes, but less than people think. ₹1 lakh at 10% for 10 years grows to ₹2,59,374 with annual compounding, ₹2,68,506 with quarterly, ₹2,70,704 with monthly, and ₹2,71,791 with daily — a spread of just 0.95% across frequencies. The bigger lever is rate (a 1% higher rate over 10 years adds 10x more than switching from annual to daily compounding) and time (an extra 5 years adds far more).
What is the effective annual rate (EAR)?
EAR is the rate that, if compounded once a year, would produce the same maturity as the actual compounding schedule. It is calculated as EAR = (1 + r/n)^n − 1. For 7% with quarterly compounding (the default for Indian bank FDs), EAR = (1 + 0.07/4)^4 − 1 = 7.19%. The EAR lets you compare instruments with different compounding frequencies on a level field — always compare effective rates, not nominal rates.
How does the rule of 72 work for compound interest?
The rule of 72 estimates how many years it takes money to double at a given rate of return — divide 72 by the rate. At 8% money doubles in ~9 years; at 12% in ~6 years; at 6% in ~12 years. The rule is most accurate for rates between 6% and 12%. For higher precision use the "rule of 69.3" or solve t = ln(2) / ln(1+r) — but rule of 72 is good enough for back-of-the-envelope planning.
Why do small differences in interest rate matter so much?
Because of exponential compounding. A ₹10 lakh investment for 30 years at 10% becomes ₹1.74 Cr; at 12% it becomes ₹2.99 Cr; at 14% it becomes ₹5.10 Cr. The 4 percentage point gap between 10% and 14% almost triples the corpus. This is why low-cost index funds (which preserve 1-1.5% extra return by avoiding high expense ratios) compound into significantly larger retirement corpuses than high-fee actively managed funds.
How is compound interest taxed in India?
It depends on the instrument. Bank FD interest is fully taxable at slab rate every year as it accrues, even if you do not withdraw it (TDS at 10% above ₹50K threshold). Debt mutual funds are taxed only on redemption at slab rate (post April 2023, no LTCG benefit). Equity mutual funds get LTCG at 12.5% above ₹1.25L per year. PPF and EPF interest are entirely tax-free. The tax drag dramatically affects post-tax compounding, so always compare net-of-tax returns.

Related calculators

CAGR CalculatorAnnualised growth rate from start and end valuesSIP CalculatorCompounding on monthly mutual fund investmentsLumpsum CalculatorOne-time investment future value at any rateFD CalculatorQuarterly compounding on Indian bank FDs

Calculator assumes a constant interest rate over the entire tenure. Real-world returns on market-linked instruments fluctuate year-to-year. Tax is not deducted in the projection — apply your slab rate on FD/debt interest and capital gains tax on equity to estimate post-tax outcomes.