See how your savings grow over time with compound interest and regular monthly contributions.
Rates as of Q2 2025 (example)
A compound interest calculator shows how an investment grows over time when interest is earned not only on the original principal but also on all previously earned interest — the "interest on interest" effect that makes long-term investing so powerful. Enter an initial investment, a monthly contribution, an annual interest rate, and a time horizon to see the projected corpus at the end. This concept underlies nearly all long-term savings and investment products in India: Fixed Deposits (FDs), Recurring Deposits (RDs), Public Provident Fund (PPF), National Savings Certificate (NSC), Mutual Fund SIPs, and EPF all benefit from compounding. Albert Einstein famously called compound interest the eighth wonder of the world.
When interest compounds monthly (the most common compounding frequency for Indian FDs, MFs, and savings products), each month\'s interest is added to the principal, and the next month\'s interest is computed on this higher balance. Monthly contributions further accelerate growth.
Formula: A = P × (1 + r/n)nt + C × [(1 + r/n)nt − 1] ÷ (r/n), where P = initial investment, C = monthly contribution, r = annual rate (decimal), n = 12 (monthly compounding), t = years.
Example: Initial investment ₹1,00,000, monthly contribution ₹5,000, 8% annual return (example rate — e.g., a diversified equity SIP), 20-year horizon: Total contributions = ₹1,00,000 + (₹5,000 × 240) = ₹13,00,000. With compounding, total corpus ≈ ₹32,93,000. Total interest earned ≈ ₹19,93,000 — more than the total amount contributed. (Note: this is an illustrative projection. Mutual fund and equity returns are not guaranteed.)
Understanding compounding is fundamental to personal finance in India. Key instruments and how compounding applies: Public Provident Fund (PPF) — compounded annually at a government-declared rate (currently 7.1% p.a. for 2024-25), 15-year lock-in, tax-free maturity amount. Employees Provident Fund (EPF) — interest credited annually at approximately 8.25% for 2023-24, tax-free on maturity for qualifying contributions. Sukanya Samriddhi Yojana (SSY) — annual compounding at 8.2% p.a. (2024-25), for girl children, tax-free. Fixed Deposits — quarterly compounding is the standard for Indian bank FDs; the Effective Annual Yield (EAY) is higher than the nominal rate because of quarterly compounding. Mutual Fund SIPs — growth in equity mutual funds is not guaranteed, but long-term SIPs in diversified equity funds have historically shown CAGR of 12-15% over 15+ year periods (Nifty 50 historical CAGR ≈ 12-14%); use 10-12% as a conservative projection. National Savings Certificate (NSC) — 7.7% compounded annually (2024-25), 5-year tenure. The start-early advantage in compounding is dramatic: ₹10,000/month invested at 12% CAGR for 30 years grows to approximately ₹3.52 crore, vs only ₹98.9 lakh for 20 years — 10 extra years more than double the outcome.
Simple interest is calculated only on the original principal: SI = P × R × T (where T is in years). Compound interest is calculated on the principal plus all previously accumulated interest — each period, interest earns further interest. For long time horizons, compound interest produces dramatically larger outcomes than simple interest. For example, ₹1,00,000 at 8% for 20 years: simple interest gives ₹2,60,000 (₹1,60,000 interest); compound interest (monthly) gives approximately ₹4,93,000 (₹3,93,000 interest). Most financial products in India use compound interest: FDs (quarterly), PPF (annual), mutual funds (continuous compounding through NAV growth).
The Public Provident Fund (PPF) interest rate for July-September 2024 is 7.1% per annum, set quarterly by the Government of India. PPF interest is calculated monthly on the minimum balance between the 5th and last day of each month, but credited to the account only once a year (at the end of the financial year, on March 31). This means deposits made before the 5th of the month earn interest for that month. Despite annual crediting, the 15-year lock-in of PPF means the annual compounding effect over the full tenure is substantial — and the maturity amount is completely tax-free, making the effective post-tax return higher than the nominal 7.1%.
More frequent compounding generates a higher effective return. For a 9% nominal annual rate: annual compounding gives EAR of exactly 9%; quarterly compounding gives EAR of 9.31%; monthly compounding gives EAR of 9.38%; daily compounding gives EAR of 9.42%. The difference seems small but matters significantly over long periods. Indian bank FDs compound quarterly, so the EAR is slightly higher than the stated annual rate. Mutual fund NAV compoundes continuously. PPF interest is calculated monthly but credited annually, behaving approximately like annual compounding. This calculator uses monthly compounding as the default.
The Rule of 72 is a quick mental calculation to estimate how long it takes to double an investment: divide 72 by the annual interest rate. At 8% (PPF rate), ₹1 lakh doubles in approximately 9 years. At 12% (expected equity SIP CAGR), it doubles in 6 years. At 7.1% (current PPF): 72 ÷ 7.1 ≈ 10.1 years. At 10% (FD for senior citizen): 72 ÷ 10 = 7.2 years. This rule helps Indian investors quickly compare different investment instruments without a calculator — useful for understanding the long-term difference between different return rates.
Yes — interest earned on Fixed Deposits and savings accounts is taxable as "Income from Other Sources" and added to your total income, taxed at your applicable income slab rate. Banks deduct TDS (Tax Deducted at Source) at 10% when annual FD interest exceeds ₹40,000 (₹50,000 for senior citizens). If your total income is below the basic exemption limit, file Form 15G (or 15H for seniors) to prevent TDS deduction. In contrast, PPF maturity, EPF maturity (qualifying), and Sukanya Samriddhi are completely exempt from income tax. Equity mutual fund long-term capital gains (LTCG) above ₹1.25 lakh are taxed at 12.5% (post-Budget 2024 change).
A SIP (Systematic Investment Plan) and a lump sum at the same annual rate generate different outcomes because of the timing of investments. A lump sum invested at the start benefits from compounding the full amount from day one, while SIP contributions are averaged over the investment period. For equal total contributions: at the same CAGR, a lump sum invested at the beginning will typically grow more than monthly SIP contributions over the same period (because each SIP instalment has less time to compound). However, SIPs benefit from Rupee Cost Averaging in volatile markets — buying more units when prices are low and fewer when high — which can improve returns in equity markets. Use this calculator to compare both scenarios by setting monthly contribution to zero for a lump sum projection.
Disclaimer: This calculator provides illustrative projections only. Actual returns depend on the investment instrument, market conditions, and applicable tax treatment. Mutual fund returns are not guaranteed — past performance is not indicative of future results. PPF and government savings scheme rates are subject to quarterly revision by the Government of India. Consult a SEBI-registered investment adviser or financial planner before making investment decisions.