Compound Interest at a Glance
- •Formula: A = P × (1 + r/n)n×t — n is how many times interest is added per year.
- •More frequent compounding = more interest: daily > monthly > quarterly > yearly, at the same rate.
- •Indian bank FDs compound quarterly; savings account interest is calculated on daily balance, credited quarterly.
- •Simple interest never compounds — ₹1 lakh at 8% simple earns ₹40,000 in 5 years; compounded yearly it earns ₹46,933.
The Real Problem This Solves
Most people can estimate simple interest in their head, but compound interest is where every real product lives — FDs, savings accounts, mutual funds, loans — and the mental math fails because interest starts earning interest.
Worse, "8% per annum" means different final amounts depending on whether it compounds daily, monthly, quarterly, or yearly — a detail banks rarely spell out. This calculator computes the exact maturity for any frequency and shows the frequencies side by side.
How Compound Interest Is Calculated (Daily, Monthly & Yearly)
The formula is A = P × (1 + r/n)n×t: P is your principal, r the annual rate, t the years, and n the compounding frequency — 365 for daily, 12 for monthly, 4 for quarterly, 1 for yearly.
Example: Rahul invests ₹1 lakh at 8% for 5 years. Compounded yearly, it grows to ₹1,46,933. Compounded monthly, ₹1,48,985. Compounded daily, ₹1,49,176. Same money, same rate — the frequency alone changed his interest from ₹46,933 to ₹49,176.
Notice the gap between daily and monthly is small (about ₹191 here), but the gap between compounding and not compounding is huge: simple interest on the same deposit earns only ₹40,000. The real power shows over time — at 8% monthly compounding, money roughly doubles in 9 years (the Rule of 72: 72 ÷ rate ≈ years to double).
Comparing bank products? FDs use quarterly compounding — check real maturity values with our FD calculator, or see what a one-time mutual fund investment could do with the lumpsum calculator.
| Compounding | ₹1 Lakh @ 8%, 5 yrs | Interest Earned |
|---|---|---|
| Simple interest (none) | ₹1,40,000 | ₹40,000 |
| Yearly | ₹1,46,933 | ₹46,933 |
| Quarterly (bank FDs) | ₹1,48,595 | ₹48,595 |
| Monthly | ₹1,48,985 | ₹48,985 |
| Daily | ₹1,49,176 | ₹49,176 |
Frequently Asked Questions
How do I calculate compound interest?
Use A = P × (1 + r/n)^(n×t), where P is principal, r the annual rate as a decimal, n the number of compounding periods per year, and t the years. The interest earned is A minus P. This calculator does it instantly for daily, monthly, quarterly, half-yearly, or yearly compounding.
Does daily compounding earn much more than monthly?
Only slightly — on ₹1 lakh at 8% for 5 years, daily compounding earns about ₹191 more than monthly. The frequency matters far less than the rate and the time invested. Never pick a product on compounding frequency alone.
Which Indian products compound daily, monthly, or quarterly?
Bank FDs and RDs compound quarterly. Savings account interest is calculated on your daily closing balance but credited quarterly. Most loan interest accrues monthly. Credit card debt effectively compounds daily — which is why it grows so fast.
What is the Rule of 72?
A quick mental shortcut: divide 72 by the annual rate to estimate how many years money takes to double. At 8%, roughly 9 years; at 12%, roughly 6 years. It works because of compounding.
Is compound interest income taxable?
Interest from FDs, RDs, and savings accounts is added to your income and taxed at your slab rate. Equity mutual fund gains are taxed as capital gains instead. The calculator shows pre-tax maturity.
Related Calculators
Seen what compounding does to a lump sum?
Now put it on autopilot. A monthly SIP applies the same compounding to small, regular investments — see what ₹5,000/month becomes in 10 years.
Open SIP Calculator →