Compound interest calculator

What compound interest is

Compound interest is interest on interest. Each time interest is added to your balance, the next round of interest is worked out on the bigger amount. With simple interest, you earn only on the money you put in. Over a few months the two look the same; over ten or twenty years compounding pulls far ahead.

How often interest is added matters a little. Indian bank FDs add it quarterly, many savings schemes yearly, some deposits monthly. The yearly rate you are quoted is the nominal rate; what you actually earn in a year is the effective yearly rate. 8% compounded quarterly is about 8.24% effective.

Meena's FD in Kallakurichi

Meena teaches at a government school in Kallakurichi. In 2026 she puts ₹1 lakh in a 10-year bank FD at 8%, with interest added every quarter. Here is what the same ₹1 lakh becomes at each frequency:

Compounding earns her about ₹40,800 more than simple interest would. Moving from quarterly to monthly adds only about ₹1,160: the rate and the years matter far more than how often interest is added.

She also adds ₹3,000 a month to a recurring deposit for her daughter's college. The Reach a goal mode works out the monthly deposit for a target, and Rate I need shows the rate a plan depends on.

How to use this tool

1. Pick Grow my money, Reach a goal or Rate I need.
2. Type the starting amount (₹0 is fine if you only add deposits).
3. Set the rate, the years (up to 100) and any extra months.
4. Choose how often interest is added.
5. Turn on Regular deposits to add a fixed amount every month, quarter or year, at the start or end of each period.
6. Turn on After tax or Inflation for the real picture.

The chart shows the balance against what you put in, with simple interest as a dashed line. The table shows every year: opening balance, deposits, interest, tax and closing balance.

The Rule of 72

A quick way to guess how long money takes to double: divide 72 by the yearly rate. At 8%, 72 ÷ 8 = 9 years. The tool shows this beside the exact answer (about 8.8 years at 8% compounded quarterly), so you can see how close the shortcut is.

Tax and inflation

Interest from FDs, RDs and savings accounts is added to your income and taxed at your slab every year, even if you leave it in the deposit. That takes a slice out of each year's compounding. Mutual funds are taxed only when you sell, so more of the money keeps compounding. The Tax paid choice shows both ways.

Prices rise too. India's retail inflation was 5.54% in September 2026 (MoSPI). At 5% inflation, ₹2.2 lakh in ten years buys about what ₹1.35 lakh buys today. Turn on Inflation to see the final amount in today's money.

Common mistakes

• Comparing rates with different compounding. 7.9% compounded monthly beats 8% compounded yearly. Compare the effective yearly rate.
• Breaking the deposit early. Early withdrawal usually means a lower rate and a penalty.
• Ignoring tax. At the 30% slab, an 8% FD earns about 5.6% after tax.
• Starting late. Five extra years often add more than a higher rate.
• Forgetting the deposit timing. A deposit made at the start of each month earns one more month of interest than one made at the end. Over 15 years that adds up.

Rates and figures here were checked in October 2026. This tool is a guide, not financial advice.