One calculation, whether the interest is paid to you or charged to you
Interest is a single piece of arithmetic. A deposit growing at 7%, a debt growing at 7%, and the abstract question “what does 1,00,000 become at 7%” are the same sum — only who benefits changes. This calculator is built that way on purpose: the switch at the top changes the wording, not the numbers, so a loan and a deposit at the same rate can never disagree with each other here.
Pick Money I am saving and it talks about what you pay in and what it grows to. Pick Money I owe and the same figures become what you borrowed and what you will owe, with one extra line most lenders never show you: what ₹100 borrowed turns into by the end. Pick Just the arithmetic and it drops the framing entirely and gives you principal, interest and final amount — which is what you want if you are checking a textbook answer, an exam question, or someone else’s spreadsheet.
The four tabs decide which unknown you are solving for. Give it any three of principal, rate, time and final amount, and it works out the fourth. Everything is calculated month by month rather than by applying a formula to the end date, which is why a term of 42 months, a balance topped up every month, and daily compounding all work in the same calculation — and why the headline, the chart, the year-by-year table and the CSV all come from one run and cannot drift apart.
What “compounded quarterly” is actually doing
Almost every rate comes with a second number that is easy to skim past and decides what the first one is worth: how often the interest is added. Once interest joins the balance it starts earning — or costing — interest itself, so the more often that happens, the further the total moves.
Two things are worth taking from that. The jump from yearly to quarterly is most of the whole prize; after monthly the extra is loose change. And continuous compounding is not a trick or a marketing term — it is the mathematical ceiling, what you would get if interest were added every instant. The gap between daily and continuous here is fourteen rupees on a lakh over a decade. If a scheme makes claims about “continuous” compounding, that is the whole of what it can possibly mean.
This cuts both ways, and the direction matters. On savings, more frequent compounding is a small gift. On a debt it is a small tax, and on high-rate debt it is not small at all — which the section on borrowing below works through.
The one number that lets you compare two rates
7% compounded quarterly and 7.1% compounded yearly are not easy to rank in your head. The figure that settles it is the effective annual rate: what the money actually moves by over a year once the compounding is accounted for.
7% compounded quarterly is an effective 7.186%. 7% compounded monthly is 7.229%. 7% compounded daily is 7.250%. So the 7.1% yearly offer beats the 7% quarterly one, narrowly, and loses to the 7% monthly one. You cannot see that from the headline rates alone, and it is the only comparison that means anything — for a loan just as much as for a deposit.
The calculator shows this on every compound calculation, next to the nominal rate you typed, so you can carry the number to another product and compare like with like. It does not change as the term gets longer. That is the point of it: a rate is a rate whether you hold the thing for one year or thirty.
The annual return figure that most calculators get wrong
This is worth spelling out, because the previous version of this page got it wrong and so do many others.
It is tempting to work out an “average annual return” by taking the total interest, dividing by the principal, and dividing again by the number of years. That is a fair description of simple interest. Applied to a compound calculation it is meaningless, and it gets worse the longer the term runs.
On ₹1,00,000 at 12% compounded monthly, that formula gives 16.33% over five years, 49.46% over twenty, and 116.50% over thirty. The real annual rate is 12.68% in every one of those cases. The formula is not measuring a rate at all — it is measuring how much time has passed and presenting it as performance.
The reason it climbs is that dividing a compounded total by the number of years spreads the later years’ growth, which is much larger because it is growth on top of growth, evenly across the early years where it never happened. If a calculator reports an average annual return far above the rate you typed, that is the error you are looking at. What this page shows instead is the effective annual rate defined above, and, when you add a monthly amount, the money-weighted return of the actual payments. Both are figures you could check independently.
Simple interest is not a smaller version of compound interest
Simple interest is charged or paid only on the original principal. It never earns interest on interest, so the balance climbs in a straight line instead of a curve. Over one year the difference is nearly invisible. Over a working lifetime it is most of the outcome.
At ten years the gap on ₹1,00,000 at 7% is about ₹30,000. At thirty years it is ₹4,91,918 — a compound balance of ₹8,01,918 against a simple ₹3,10,000. Nothing changed but whether the interest was allowed to compound.
You meet simple interest more often than you might expect. Many vehicle and personal loans quote it. Some corporate deposits pay interest out rather than reinvesting it, and a fixed deposit on a payout option is effectively simple interest as far as that money is concerned, because the interest leaves the account. In exam and textbook problems it is usually the default unless compounding is stated. Switching this calculator to Simple shows exactly what that choice is worth, against the same rate left to compound.
Interest on money you owe behaves the same, and hurts more
Everything above applies unchanged to debt. The reason it feels different is that borrowing rates are usually much higher, and compounding is unforgiving at high rates.
A credit card quoting “3% per month” is not charging 36% a year. Compounded monthly it is an effective 42.58%. On a ₹1,00,000 balance left untouched for three years at that rate, you would owe about ₹2.9 lakh. Put those numbers into Money I owe and the tool shows you the same arithmetic from the other side, including the line that tends to land hardest: what ₹100 borrowed turns into by the end.
Two honest caveats about using this for a loan. First, it models a debt that is not being repaid — a balance rolling forward, an overdraft, a card you are only servicing, or a loan in moratorium. If you are making regular instalments the balance falls every month, which is a different calculation; use the EMI calculator or the loan calculator for that. Second, real lending costs include processing fees, insurance sold alongside, and penalties, none of which are interest and none of which appear here. A quoted rate is rarely the whole cost of a loan.
There is one respect in which inflation is a borrower’s friend rather than an enemy: it erodes the real value of a fixed debt just as it erodes the real value of savings. Switch on the present-value option while in Money I owe and it shows what the future debt is worth in today’s money, which for a long fixed-rate loan is meaningfully less than the number on the statement.
Days in a year: 365, 360, and why the answer moves
Enter a term in days and a day-count option appears, because there is no single right answer to how many days a year contains for the purpose of interest.
Retail deposits and loans in India generally use actual/365. Money markets, many commercial loans and a great deal of international lending use actual/360, which quietly makes a rate worth more: 90 days is a quarter of a 360-day year but only 0.2466 of a 365-day one. On ₹1,00,000 at 7% for 90 days the difference is small in absolute terms, but it is a real difference and it is the reason a lender’s figure sometimes does not match a calculator’s.
A 366-day option is there for leap years. If your bank’s number disagrees with this page by a few rupees on a short deposit, the day-count basis is the first place to look, and the rounding convention at each credit is the second.
Working it backwards: rate, time, or the amount you need to start with
Three of the four tabs solve in reverse, which is usually the more useful direction. The rate answers “I have this, I need that by then — what does that demand?” The time answers “at this rate, how long until I get there?” And The starting amount answers “how much do I need to put in today to end with this?” — the present-value question, which is the one most often asked and least often offered.
All three search the same month-by-month calculation rather than using a separate formula, which matters practically: once there is a monthly addition, or simple interest, or quarterly compounding, the neat closed-form answer stops existing. Searching the real calculation keeps every answer consistent with the table beneath it.
They also refuse impossible questions and say why. Ask what rate turns ₹1,00,000 into ₹50,000 and you are told that interest only makes a balance bigger. Ask how long ₹1,00,000 takes to reach ₹2,00,000 at 0% and you are told it never will. Ask for a rate when your monthly additions already overshoot the target on their own, and it says so and tells you what to change. A calculator that answers “invalid input” to a reasonable question has told you nothing at all.
The rule of 72, and exactly where it stops working
The rule of 72 is the mental shortcut for how long money takes to double: divide 72 by the rate. At 8%, nine years. It is genuinely useful, and it is an approximation, so it is worth knowing which way it errs.
At 4% the rule says 18 years against a true 17.67 — pessimistic by four months. At 8% it is almost exactly right. At 15% it says 4.8 years when the answer is 4.96, and at 20% it says 3.6 against a real 3.80. The rule is accurate around 8% and drifts optimistic as rates rise, which is the wrong direction when someone is quoting you a high rate — and a very wrong direction when the high rate is on a debt you owe.
Use The time tab when the number matters. It solves the same calculation as the rest of the page, so the answer is consistent with the table rather than being a separate approximation.
Inflation and tax both come out of the same number
A deposit that doubles in ten years sounds like it doubled your money. Two things happen before you get to spend it, and neither appears in the headline.
The tax switch applies a flat percentage to the interest, whatever your jurisdiction charges — it is deliberately not tied to any one country’s rules. In India, interest from bank and post office deposits is not taxed at a special low rate: it is added to your income and taxed at your slab, with tax deducted at source once it passes a threshold. On the ten-year example above a 30% slab removes ₹30,048. Then inflation removes a great deal more: ₹1,70,112 in 2036, at 6% inflation, buys about what ₹94,990 buys today.
So a headline that doubled the money left you, in purchasing power, with slightly less than you started with. That is not an argument against saving — holding cash instead is strictly worse — but it is the honest arithmetic, and it is why the real question about any rate is whether it beats inflation, not whether the final number looks large. The 6% default is the upper edge of the Reserve Bank’s 2%–6% tolerance band, so it is a cautious assumption rather than a gloomy invention.
What this calculator will not tell you
It does not know anybody’s actual rates and will not fetch them. Rates change constantly and vary by tenure, amount, and who is asking; the number has to come from you.
It does not model repayments. A debt being paid down monthly, or a deposit being drawn on, is a different calculation — see the EMI calculator or the SIP calculator depending on which direction the money flows.
It does not include fees, penalties, processing charges or the cost of insurance bundled with a loan, and it does not model the penalty for breaking a deposit early, which on most Indian fixed deposits means losing roughly 0.5% to 1% from the rate for the period you actually held it.
It assumes one rate for the whole term. A floating-rate loan, a savings account, or a small savings scheme like PPF resets periodically, so a long projection at today’s rate is an illustration rather than a forecast. Running the same term at two or three rates — which the strip under the result does automatically — is the more honest way to look at it.
And it is not advice. It is arithmetic on numbers you chose, run entirely in your browser. Nothing you type is sent anywhere, and closing the tab erases it.
Questions people ask about interest
Is a higher rate always the better deal?
Compare effective annual rates rather than quoted ones, then check what the calculator cannot see: fees, early-exit penalties, whether interest is paid out or reinvested, and for a deposit whether the institution is covered by deposit insurance. A rate well above everyone else’s is usually paying you for a risk.
My bank’s figure differs from this by a few hundred rupees. Why?
Almost always a day-count or rounding convention. Banks may compound on calendar quarters rather than from your start date, count 366 days in a leap year, and round the credited interest at each step. Over a few years that accumulates to a few hundred rupees on a lakh. The institution’s own figure is the one that will be paid; treat this as a planning number.
Why does my quarterly calculation show interest in the first month?
Because the calculation runs monthly and credits the equivalent share each month rather than jumping in steps every three months. At every quarter end the two agree exactly — the figures match the textbook formula to the last paisa — but the month-by-month view shows it accruing smoothly. Your statement will show the actual credits on its own schedule.
Can I use this for an exam or homework question?
Yes, and Just the arithmetic exists for exactly that. Set the interest type and compounding frequency to match the question, and the figures will agree with A = P(1 + r/n)nt or A = P(1 + rt) as appropriate. The year-by-year table is often more useful than the answer itself for checking where a hand calculation went wrong.
Does adding a little every month really matter?
Switch on the monthly addition and see. It is not subtle: on ₹1,00,000 at 7% for five years, adding ₹5,000 a month turns about ₹1.41 lakh into about ₹5.01 lakh — because you have put in ₹3,00,000 more and all of it has been earning. With additions running, the page also shows the money-weighted return, which is the honest single figure for a stream of payments rather than a lump.
What is the difference between this and a recurring or fixed deposit calculator?
Mostly the conventions. This one lets you choose the compounding frequency and day count yourself, which makes it flexible but means you have to know what your product uses. For Indian RDs and FDs specifically, the RD and FD maturity calculator already assumes the usual ones, and for a one-off deposit with no additions the compound interest calculator is the more direct route.