Interest on interest, in rupees
Put ₹1 lakh at 8% a year, compounded yearly, and leave it alone for 10 years. It grows to about ₹2,15,893. Simple interest on the same ₹1 lakh would pay just ₹80,000, so compounding gives you ₹35,893 extra, only because the interest also earns interest.
The gap gets wider with time. Leave that ₹1 lakh for 30 years and it becomes about ₹10.06 lakh. At simple interest you would have ₹3.4 lakh.
The formula
A = P × (1 + r ÷ n)n × t
- P is the starting amount
- r is the yearly rate as a decimal (8% is 0.08)
- n is how many times a year interest is added
- t is the number of years
Interest earned is A minus P. Simple interest is just P × r × t.
Yearly, quarterly, monthly or daily
The more often interest is added, the more you get, but the difference is smaller than most people think. Same ₹1 lakh at 8% for 10 years:
| Compounding | Value after 10 years | Effective yearly rate |
|---|---|---|
| Yearly | ₹2,15,893 | 8.00% |
| Half-yearly | ₹2,19,112 | 8.16% |
| Quarterly | ₹2,20,804 | 8.24% |
| Monthly | ₹2,21,964 | 8.30% |
| Daily | ₹2,22,535 | 8.33% |
Yearly to quarterly adds about ₹4,900. Monthly to daily adds under ₹600. When you compare two deposits, look at the effective yearly rate, not the headline rate. Most bank FDs and RDs compound quarterly, which is what the FD calculator and RD calculator use.
Adding money every month
Use the last box if you keep topping up. Start with ₹1 lakh, add ₹5,000 at the end of every month, and at 8% for 10 years you reach about ₹11.17 lakh. You put in ₹7 lakh, so ₹4.17 lakh is interest. Each addition earns the same rate from the month it goes in.
For equity mutual funds, use the SIP calculator instead. Their returns are not a fixed rate and are not guaranteed.
Rule of 72 as a quick check
Divide 72 by the interest rate and you get roughly how many years it takes to double your money. At 8% that is 9 years, and the calculator agrees: ₹1 lakh becomes about ₹1,99,900 in 9 years. At 12% the rule says 6 years, and the calculator shows ₹1,97,382. Close enough to check a number in your head, not for exact planning.
Frequently asked questions
What is the compound interest formula?
A = P × (1 + r ÷ n)^(n × t). P is the starting amount, r the yearly rate as a decimal, n how many times a year interest is added and t the number of years. The compound interest is A minus P.
What is the difference between simple and compound interest?
Simple interest is paid only on the starting amount. Compound interest is also paid on interest already added. ₹1 lakh at 8% for 10 years earns ₹80,000 at simple interest and ₹1,15,893 compounded yearly, which is ₹35,893 more.
Which is better, monthly or quarterly compounding?
Monthly gives a little more at the same rate. ₹1 lakh at 8% for 10 years becomes ₹2,20,804 with quarterly and ₹2,21,964 with monthly compounding. To compare two deposits, look at the effective yearly rate, 8.24% and 8.30% here.
How does the rule of 72 work?
Divide 72 by the yearly interest rate to get roughly how many years your money takes to double. At 8% it is about 9 years. The calculator shows ₹1 lakh becoming ₹1,99,900 in 9 years at 8%, so the rule is close.
Can I add money every month?
Yes. Enter it in the last box. Each addition goes in at the end of the month and earns the same rate from then on. ₹1 lakh plus ₹5,000 a month at 8% for 10 years grows to about ₹11.17 lakh, of which ₹4.17 lakh is interest.
Calculator maintained by Manoj. Last reviewed: 19-10-2026. Rates and rules are checked against official sources. Tell us if something has changed. Contact
