Interest Calculator – calculate your Compound and Simple interest

What is Compound Interest?

Compound interest is the interest on interest. In simple terms, the addition of interest to the principal sum of the loan or deposit is called compound interest. If you have an investment account, you earn money on your interest. The interest that you earn is reinvested, instead of paying it out. If you are repaying a loan that charges compound interest, you are paying interest on the interest. If you earn compound interest on your investment, it grows without any further deposits. You may increase the deposits to raise the efficacy of the compound interest.


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What is Simple Interest?

The rate at which you borrow or lend money is called the simple interest. If a borrower takes money from a lender, an extra amount of money is paid back to the lender. The borrowed money which is given for a specific period is called the principal. The extra amount which is paid back to the lender for using the money is called the interest.

You calculate the simple interest by multiplying the principal amount by the number of periods and the interest rate. Simple interest does not compound, and you don’t have to pay interest on interest. In simple interest, the payment applies to the month’s interest, and the remainder of the payment will reduce the principal amount.

What is a Compound interest calculator?

A compound interest calculator is a simulation, that shows how investments grow with time. You need three parts to calculate the compound interest that is the principal amount, interest rate, and time for which the money is invested. The compound interest calculator consists of a formula box, where you enter the compounding frequency, principal amount, rate of interest, and the period. The calculator will show you the future value of your investments.

What is a Simple Interest Calculator?

A simple interest calculator is a utility tool that calculates the interest on loans or savings without compounding. You may calculate the simple interest on the principal amount on a daily, monthly, or yearly basis. The simple interest calculator has a formula box, where you enter the principal amount, annual rate, and period in days, months, or years. The calculator will display interest on the loan or the investment.

How does Compound Interest Calculators work?

The compound interest calculator works on the mathematical formula:

A = P (1+r/n)^nt

P = Principal Amount
n = Compounding frequency
r = Rate of interest
t = Number of time periods elapsed
A = Final amount

For example, you have deposited Rs 10,000 in an FD at an interest rate of 6% for five years. You have the frequency of compounding as a quarterly (n=4).

A = 10,000 (1+0.06/4)^4*5
A = Rs 13,468.

Interest = A – P = 13,468 – 10,000 = Rs 3,468.

How does Simple Interest Calculators work?

The simple interest calculator will show the accrued amount that includes both principal and the interest. The simple interest calculator works on the mathematical formula:

A = P (1+rt)

P = Principal Amount
R = Rate of interest
t = Number of years
A = Total accrued amount (Both principal and the interest)

Interest = A – P.

Let’s understand the workings of the simple interest calculator with an example. The principal amount is Rs 10,000, the rate of interest is 10% and the number of years is six. You can calculate the simple interest as:

A = 10,000 (1+0.1*6) = Rs 16,000.

Interest = A – P = 16000 – 10000 = Rs 6,000.

How to use the ClearTax Simple Interest Calculator?

The ClearTax Simple Interest Calculator shows you the simple interest you have earned on any deposits. To use the simple interest calculator:

  • You must select the interest type as simple interest.
  • You enter the principal amount.
  • You then enter the annual rate of interest.
  • You must choose the time duration in days, weeks, quarters, or years.
  • The ClearTax Simple Interest Calculator will show you the simple interest you have earned on the deposit.

How to use the ClearTax Compound Interest Calculator?

The ClearTax Compound Interest Calculator shows you the compound interest you have earned on any deposits.

To use the compound interest calculator:

  • You must enter the interest type as compound interest.
  • You select the compounding frequency as daily, weekly, quarterly, semi-annually, or annually.
  • You must enter the principal amount.
  • You 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 compound interest you have earned on the deposit.

Benefits of ClearTax Simple Interest Calculator

  • The ClearTax Simple Interest Calculator shows you the simple interest on your deposit in seconds.
  • You can compare the simple interest rates against the compound interest rates and determine the interest you pay on any loan.

Benefits of ClearTax Compound Interest Calculator

  • The ClearTax 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 must tweak the interest rates, investment duration and the investment amount to compare the return from various investments.

FAQs on the ClearTax Compound Interest Calculator

  • Why does the ClearTax Compound Interest Calculator ask you to choose the frequency of compounding?
    The ClearTax Compound Interest Calculator asks you to fill the compounding frequency from the daily, weekly, monthly, quarterly and other options. Quarterly compounding means interest is calculated and paid every three months. The ClearTax Compound Interest Calculator wants to know how often interest is added to your loans each year.
  • Is ClearTax Compound Interest Calculator easy to use?
    You can use the ClearTax 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.
  • How does ClearTax Compound Interest Calculator help you to choose an investment?
    The ClearTax Compound Interest Calculator shows you the compound interest that you earn on investments. It helps you to select the financial instruments that offer a higher interest rate based on your investment goals and risk tolerance.