### Compound Interest Calculator

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A compound interest calculator shows how an investment grows with time at a compound interest rate. You need three inputs to calculate the compound interest; principal amount, interest rate, and Period for which the money is invested.

## What is Compound Interest?

Compound interest is the interest on interest. The interest you earn on the deposit will be reinvested instead of paying it out. In simple terms, if you have investment Rs.100000  for 3 years and you will get a compounding benefit every quarter, then your money will be reinvested every quarter with an earned interest in last months.

Suppose interest rate of your investment is 12% p.a, you will receive 1% monthly interest on Rs.100000 in the initial three months of your investment. After thee months (Quarter), you investment will be reinvested will the earn interest (Rs.100000 + 3000) and you will starting receiving 1% monthly interest on Rs. 103000, after two quarters interest will be occur on Rs.106003 and It will go on until the maturity.

## Compound Interest Formula

Standardised Folmula to calculate the total compound interest accrued is below:

A = P (1 + R/N) ^ nt

• A  = Compound Interest
• P = Principal Amount
• R = Rate of Interest
• N = Number of times interest compound in a year
• nt = Number of years

### Illustration of Compound Interest Calculation

Suppose you have invested Rs. 20000 for 5 years. You earn 10% interest on your investment and your interest gets compounded annually.

So, in the first year you earn Rs.20000 on your investment of Rs.200000. In the second year, your principal amount changes to Rs.220000. You now earn Rs.22000 as interest on your new principal amount, so you now have a total of 220000 + 22000 = 242000. By using the above formula, you can easily understand the calculation of the coming years.

A = 200000 (1 + 10/1) ^ 5 = 322000

## How to use the ClearTax Compound Interest Calculator?

Steps to use the compound interest calculator:

• First, select the compounding frequency as daily, weekly, quarterly, semi-annually, or annually.
• You must enter the principal amount.
• Then choose the rate of interest and the period in days, weeks, months, quarters, or years.
• The ClearTax Compound Interest Calculator will show you the earned compound interest on the deposit.

## Benefits of Compound Interest Calculator

• Compound Interest Calculator is easy to use and shows the compound interest on deposits in seconds.
• The calculator helps you set and achieve financial goals. You get to know the interest amount you earn on the deposits.
• You may use the calculator to check multiple scenarios. You can tweak the interest rates, investment duration and the investment amount to compare the return from various investments.

## Difference Between Simple Interest and Compound Interest

• Simple interest is calculated on the principal or original amount.
• Compound interest is calculated on the principal amount and the accumulated interest of previous time before compounding frequency, and thus can be regarded as “interest on interest.

Formula of Simple interest = (P × T × R) ⁄ 100

• P= Principal Amount
• T= Term of Deposit
• R = Rate of interest

Formula of the Compounding Interest = P (1 + R/N) ^ nt

• A  = Compound Interest
• P = Principal Amount
• R = Rate of Interest
• N = Number of times interest compound in a year
• nt = Number of years

### Example of Simple interest and Compounding interest

If, Rs.10000 will be deposited for 5 years at a Simple interest rate of 8% p.a, so the maturity amount will be Rs.140,000. If we apply the same condition only the interest will be compounded with yearly frequency, so the maturity amount will be Rs.1,46,932.

Is Compound Interest Calculator easy to use?

You can use the Compound Interest Calculator from the comfort of your home. It is an easy to use tool where you enter the compounding frequency, principal amount, interest rate and the period. The ClearTax Compound Interest Calculator shows the interest you earn on the deposit in seconds.

Compound Interest Calculator shows you the compound interest that you earn on investments. It helps to choose the right investment tool, period for your investment and make your financial planning better.

I am a curious person, and Finance is at the top of my list of interests. With more than 5 years of experience in fintech, I am an expert in lending, investment and personal finance. I believe the Devil lies in details, so I dig a lot before writing anything and armed my writing pieces with figures and facts. Read more

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