Compound Interest Calculator

Compound interest is interest calculated on both the initial principal and the interest that has been accumulated from previous periods — in other words, "interest on interest." This contrasts with simple interest, which is only calculated on the principal. Over long periods, compounding creates exponential growth and is the fundamental mechanism behind wealth creation through long-term investing.

The more frequently interest is compounded, the higher the effective annual return. For example, at 10% p.a.: Annual compounding gives ₹2,59,374 on ₹1 lakh after 10 years. Monthly compounding gives ₹2,70,704 — about ₹11,330 more — simply by compounding 12 times per year instead of once. The formula is A = P(1 + r/n)^(n×t), where n is the number of compounding periods per year.

Simple Interest = P × r × t. It is linear — the same interest is earned every year regardless of accumulated interest. Compound interest grows exponentially because each year's interest is added to the base. Over 10 years at 10% on ₹1 lakh: Simple Interest gives ₹1,000 per year = ₹10,000 total interest. Compound Interest (annual) gives ₹1,59,374 total interest — nearly 16× more. The gap widens dramatically with time, which is why starting early is the most powerful financial decision.