Compound Interest Calculator

Compound interest is interest earned on both your original principal AND on the accumulated interest from previous periods. It's what separates linear growth (simple interest) from exponential growth (compound interest). Where simple interest grows your money by the same flat amount every year, compound interest grows it by an increasing amount — because the base keeps getting bigger.

Albert Einstein reportedly called compound interest 'the eighth wonder of the world,' and whether or not he actually said it, the math is genuinely impressive. ₹1 lakh invested at 10% simple interest for 30 years grows to ₹4 lakh. The same amount at 10% compound interest grows to ₹17.4 lakh — over 4x more from the same principal and rate.

The key insight: compounding is exponential. The first 10 years feel slow. The middle 10 years feel meaningful. The final 10 years feel explosive — because that's when the accumulated interest is large enough that its own growth dominates the returns.

The formula is: A = P × (1 + r/n)^(n×t), where A is the final amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of times interest compounds per year, and t is the number of years.

Here's what each part does. The (1 + r/n) represents the growth factor for one compounding period — for 10% annual rate compounded monthly, it's (1 + 0.10/12) = 1.008333. Raising this to (n×t) — 12 × 15 = 180 for a 15-year monthly compound — accounts for all the compounding periods. The result is the total multiple of your original principal.

Compounding frequency matters. The more often interest compounds, the higher your effective annual rate. For a stated 10% annual rate: annual compounding gives 10.00% effective; half-yearly gives 10.25%; quarterly gives 10.38%; monthly gives 10.47%; daily gives 10.52%. The differences look small but compound meaningfully over decades.

You can increase principal, increase rate, or increase time. Time is by far the most powerful lever. Doubling your principal doubles your result. Doubling your rate roughly triples your result. But doubling your time can quadruple or quintuple your result, because compounding is exponential in time.

Consider ₹1 lakh at 10% annual compounding. After 10 years: ₹2.59 lakh. After 20 years: ₹6.73 lakh. After 30 years: ₹17.45 lakh. After 40 years: ₹45.26 lakh. The 10-year intervals don't add equal amounts — the final 10 years add ₹27.81 lakh, more than the previous 30 years combined.

This is why financial planners push young investors to start early, even with small amounts. A 25-year-old who invests ₹1 lakh today at 10% will have ₹17.45 lakh at 55. A 35-year-old investing the same amount will have only ₹6.73 lakh at 55 — less than half, from the same principal and rate, purely because of 10 years of lost compounding.