Compound Interest Calculator
Advertised rates hide their heartbeat: eight percent compounding yearly is not eight percent compounding monthly. Enter a starting amount or recurring deposit, pick a rate and a frequency, and this tool shows both the maturity value and the effective annual yield — the honest number that lets a bank's '8%' compete fairly with a fund's '8%'. Compounding rewards frequency more than most savers realise.
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How to use this calculator
- Enter your starting amount; add an optional per-period deposit.
- Set the nominal annual rate exactly as advertised.
- Choose how often it compounds — yearly through daily.
- Compare maturity against the effective annual yield line.
- Switch frequencies and watch identical headline rates diverge.
The formula behind it
Discrete compounding follows A = P(1 + r/n)^(n·t): principal times one plus rate-over-frequency raised to frequency-times-years. Optional deposits join at each compounding date and earn from then on. The effective annual yield — (1 + r/n)^n − 1 — compresses the whole schedule into one comparable percentage: monthly compounding turns a 12% nominal into about 12.68% effective, which is why frequency quietly outearns arithmetic naivety.
Worked example
A saver compares two fixed-income products: Company A advertises 12% compounded annually, Company B 12% compounded monthly, both for three years on ₹2,00,000 with no deposits.
| Principal | ₹2,00,000 |
|---|---|
| Nominal rate | 12% p.a. (both) |
| Term | 3 years |
| Frequencies | 1 vs 12 per year |
Step by step
- Annual: 2L × (1.12)³ ≈ ₹2,80,986
- Monthly: 2L × (1.01)³⁶ ≈ ₹2,86,154
- Difference: ≈ ₹5,168 for identical advertising
- Effective yields: 12.000% vs 12.683%
Same number on the brochure, five thousand rupees apart in reality — the effective-yield line is the only fair referee between competing offers.
Frequently asked questions
What is effective annual yield?
The true yearly growth once intra-year compounding is counted. A 12% nominal rate compounded monthly produces 12.68% effective because each month's interest itself earns interest for the remaining months.
Do Indian banks compound deposits daily?
Savings accounts commonly compound daily or quarterly depending on the bank; term deposits typically compound quarterly. Always confirm the product's actual frequency rather than assuming.
Does continuous compounding exist here?
Only as a mathematical limit (A = Pe^rt). Real products use discrete schedules — daily is the practical ceiling — so this tool stops at daily frequency.
How do periodic deposits affect the math?
Each deposit begins earning from its own compounding date. The tool sums every deposit's individual growth path, matching what an AMC or bank statement would show for staggered investments.
Frequency as the quiet variable
Rate comparisons dominate financial advertising while frequency comparisons barely exist, yet at equal rates the gap compounds into real money across years. The divergence grows with both the rate and the horizon: at single digits the yearly-versus-monthly spread is modest, but at double-digit nominal rates — common in Indian credit cards and some corporate deposits — it becomes decisive. Anyone comparing instruments should normalise everything to effective annual yield first and only then argue about rates.
Frequency also disciplines debt thinking. Credit card APRs quoted monthly can conceal effective rates well above casual expectations, because the same mathematics that blesses savers taxes borrowers. Running a card's advertised figure through this calculator at monthly frequency reveals its true annual appetite — often the fastest financial education available for free.
Where compounding actually appears in Indian products
Fixed deposits state quarterly compounding explicitly; savings accounts vary by bank policy; recurring deposits compound quarterly; mutual funds do not compound at all in any scheduled sense — their NAVs simply fluctuate, and 'compounding' there is shorthand for reinvested growth staying invested. Understanding which mechanism each product truly uses prevents category errors when projecting outcomes.
The practical takeaway is to match tool to instrument. For deposits and loans, this page's frequency-aware arithmetic mirrors contract terms closely. For market-linked investments, expected-return projections like those on our lump sum and monthly investment pages model the same idea without pretending to contractual certainty — a distinction worth respecting in both directions.
Small print deserves a magnifying habit around two phrases: 'effective yield' and 'payout option'. Products quoting effective yields have already done the frequency translation for you, making direct comparison legitimate; products offering monthly payout versus growth options are describing cash-flow timing, not different returns, yet savers routinely treat receiving interest as somehow separate from earning it. Reinvestment is what converts frequency into advantage; anything that pays interest out interrupts your own compounding chain and quietly hands the benefit to whoever borrows next.
A final calibration: at realistic Indian deposit rates the yearly-versus-monthly difference amounts to basis points that rarely justify chasing exotic instruments. The lesson of this page is not that frequency hunting makes you rich; it is that headline rates are incomplete sentences. Finish them with frequency and tax, then choose between plain, boring options on total after-tax effective terms.
Related calculators
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- Monthly Investment CalculatorProject recurring monthly deposits, with annual step-ups, into a maturity figure that motivates.
- CAGR CalculatorCompress any start value, end value, and duration into one honest annualised growth rate.
Data sources & verification dates
- Reserve Bank of India (RBI) — Effective Annual Yield & Compounding Frequency Rules — verified as of 2026-08-26
- SEBI Investor Education — Power of Compounding & Return Modeling — verified as of 2026-08-26
stockcalculator.in Research Desk — Editorial team; verifies every figure against official sources before publishing
Last updated . Figures are re-verified against official sources on every revision — see our methodology.
Disclaimer
Calculations on stockcalculator.in run entirely in your browser using the inputs you provide. Figures shown are estimates for education and planning only. We are not SEBI-registered investment advisers and nothing on this site is investment advice. Verify anything material with your broker, fund house, or a qualified adviser before acting on it.