How this calculator works
Compound interest grows your principal using the formula: A = P × (1 + rate ÷ 100 ÷ frequency)frequency × years, where P is your principal, rate is the annual interest rate, and frequency is how many times per year interest compounds (1 for annually, 2 for semi-annually, 4 for quarterly, 12 for monthly).
Interest earned is simply the maturity amount minus your original principal: Interest = A − P.
The more frequently interest compounds, the sooner each bit of interest starts earning interest of its own — so for the same rate and time period, more frequent compounding always produces a slightly higher maturity amount.
Worked example
| Compounding | Principal | Rate | Years | Maturity Amount | Interest Earned |
|---|---|---|---|---|---|
| Annually | ₹1,00,000 | 8% | 5 | ₹1,46,933 | ₹46,933 |
| Monthly | ₹1,00,000 | 8% | 5 | ₹1,48,985 | ₹48,985 |
Same principal, rate, and time period — just a different compounding frequency — produces a ₹2,052 difference in final payout. This is why it's worth checking how often your bank or scheme compounds interest, not just the headline rate.
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Book a Free Consultation →What is compound interest?
Compound interest is interest calculated on both your original principal and the interest that has already accumulated. Each compounding period, the interest earned gets added back to the balance, so future interest is earned on a slightly larger amount — this is what makes compound growth accelerate over time compared to simple interest.
What's the difference between simple and compound interest?
Simple interest is calculated only on the original principal every period, so it grows at a constant rate. Compound interest is calculated on the principal plus all previously accumulated interest, so it grows faster the longer it runs. Use the Simple Interest Calculator to see the difference on the same numbers.
Does compounding frequency really matter?
Yes — more frequent compounding yields slightly more, because interest starts earning interest sooner. For example, ₹1,00,000 at 8% for 5 years grows to ₹1,46,933 with annual compounding, but ₹1,48,985 with monthly compounding — the same rate and time, but a higher payout purely from compounding more often.
Is this the formula banks use for FDs?
Yes, this is the standard compound-interest formula behind FD/RD-style products. For a dedicated fixed deposit calculator with quarterly compounding defaults (the norm for most Indian bank FDs), see the FD Calculator.
This tool is for quick estimation only and is not a substitute for professional financial or tax advice. For your specific situation, consult a practicing CA.
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