How to use it
- Enter the principal (P) and the rate of interest (R) per year.
- Enter the time in years and months.
- Choose how often interest is compounded: yearly, half-yearly, quarterly, monthly or daily.
- Read the amount, compound interest and simple interest, with the formula and your numbers shown below.
Compound interest formula
A = P × (1 + R ÷ (100 × n))ⁿᵀ and CI = A − P
- P = principal, R = rate per year (%), T = time in years
- n = number of times interest is compounded in a year (1 yearly, 2 half-yearly, 4 quarterly, 12 monthly, 365 daily)
Worked example
₹10,000 at 10% a year for 2 years, compounded yearly:
- A = 10,000 × (1.10)² = ₹12,100
- CI = 12,100 − 10,000 = ₹2,100
- Simple interest for the same loan would be 10,000 × 10 × 2 ÷ 100 = ₹2,000, so compounding earns ₹100 more.
A textbook example: ₹8,000 at 5% for 3 years compounded yearly gives 8,000 × (1.05)³ = ₹9,261, so CI = ₹1,261.
How often interest is compounded
The more often interest is added, the faster the amount grows. ₹10,000 at 10% for 2 years:
| Compounded | Amount | Compound interest |
|---|---|---|
| Yearly | ₹12,100.00 | ₹2,100.00 |
| Half-yearly | ₹12,155.06 | ₹2,155.06 |
| Quarterly | ₹12,184.03 | ₹2,184.03 |
| Monthly | ₹12,203.91 | ₹2,203.91 |
| Daily | ₹12,213.69 | ₹2,213.69 |
When the time isn’t a whole number of periods
For a part period, this calculator compounds every complete period and then adds simple interest for the time left — the method used in Indian school textbooks and by banks. For ₹10,000 at 10% for 2½ years compounded yearly: A = 10,000 × (1.10)² × (1 + 0.10 × ½) = ₹12,705. Some calculators raise to a fractional power instead (10,000 × 1.10^2.5 ≈ ₹12,690.59); for whole periods both methods give the same answer.
The Rule of 72
A quick way to estimate how long money takes to double with yearly compounding: divide 72 by the interest rate. At 8% a year it takes about 72 ÷ 8 = 9 years (1.08⁹ ≈ 2.0); at 12%, about 6 years. It is only an approximation, but a handy one for checking whether an offer sounds realistic.
Compound vs simple interest
Simple interest is always worked out on the original principal. Compound interest is worked out on the principal plus the interest already earned, so the gap between the two grows every year. That is why long-term savings grow faster than you might expect — and why unpaid loan interest can snowball.
See compounding at work in real products with the FD calculator, SIP calculator and PPF calculator, or check a loan with the EMI calculator.