8% is the nominal rate — the number quoted per year, before accounting for how often it's actually applied. Because it compounds 1 time(s) annually here, what a full year of reinvested interest actually delivers — the effective annual rate — comes out closer to 8.00%, using EAR = (1 + R/(100n))ⁿ − 1. Compound more often within the year and that gap between nominal and effective widens, even with the quoted rate held fixed.

This is the figure worth comparing when two products advertise the same headline rate but compound on different schedules — monthly compounding out-earns annual compounding at an identical nominal rate, purely because interest starts earning its own interest sooner. Ads tend to lead with the nominal number since it looks tidier on a poster; ask for the effective rate before choosing between two offers.

• Principal (P): ₹5,00,000
• Nominal annual rate: 8%
• Effective annual rate: 8.00%
• Time: 5 years
• Compounding frequency: 1 per year
• Total compound interest: ₹2,34,664
• Maturity (P + interest): ₹7,34,664

Simple interest on the same P, R, and T would total about ₹7,00,000 — ₹34,664 less than the compounded figure, purely from reinvesting each period's interest rather than letting it sit outside the balance.

A well-worn shortcut for how long money takes to double under compounding: divide 72 by the annual rate. At 8%, that gives roughly 9.0 years. Running the actual compounding formula instead of the shortcut gives about 9.0 years — close, but not identical, which is exactly what you'd expect from an approximation. It holds up best for rates roughly between 6% and 10% and drifts further off at the extremes.

For contrast, simple interest doubles in 100 ÷ R years rather than roughly 72 ÷ R — a concrete way to see why compounding reaches the same milestone meaningfully faster at an identical nominal rate. A couple of lesser-used cousins exist too — "Rule of 114" for tripling, "Rule of 144" for quadrupling — built on the same logic, though neither shows up nearly as often as the Rule of 72.

Say the target is a maturity of about ₹15,00,000 in the same 5 years, at the same 8% nominal rate compounded 1 time(s) a year. Rearranging the compound interest formula to solve for principal instead of maturity puts the number you'd need to start with today at approximately ₹10,20,874 — well above the ₹5,00,000 used in the base scenario, since the target here is roughly double the base maturity.

Closing that gap without a bigger principal means one of two things: more time for compounding to do its work, or a higher rate, which usually means a riskier product. Worth knowing which lever you're actually able to pull before assuming the goal is out of reach.

1. Start with the principal: ₹5,00,000.
2. Note the nominal annual rate: 8%.
3. Note the compounding frequency: 1 time(s) per year, so the rate applied each period is 8.000%.
4. Note the tenure: 5 years, meaning 5 compounding periods in total.
5. Apply the period rate repeatedly: after the first period the balance is about ₹5,40,000; after all 5 periods it reaches ₹7,34,664.
6. Subtract the principal to isolate the interest: ₹7,34,664 − ₹5,00,000 = ₹2,34,664.
7. Check it against simple interest on the same numbers — ₹7,00,000 — and the ₹34,664 difference is what compounding alone contributed.

Hold the principal, rate, and tenure fixed and just change how often interest compounds, and maturity moves with it — here's the pattern across the common frequencies.

The gap between annual and monthly compounding at an identical nominal rate is real but often modest over shorter tenures at typical retail rates — it widens as either the rate or the tenure grows. For a saver, more frequent compounding is never worse at the same nominal rate. For a borrower it runs the other way: more frequent compounding on an outstanding balance raises the effective cost, even when the quoted rate on paper looks the same.

Every figure on this page is pre-tax. In practice, interest from bank fixed deposits, recurring deposits, and similar instruments gets added to your total income and taxed at your income-tax slab rate — not a flat rate. On the roughly ₹2,34,664 of interest in this scenario, what you'd actually owe depends entirely on the rest of your taxable income for the year.

• TDS: banks generally withhold tax at source once interest from a single bank crosses a threshold in a financial year (senior citizens get a higher threshold). TDS isn't the final word — you settle up, refund or top-up, when you file.
• Form 15G/15H: if your total income sits below the taxable limit, filing Form 15G (or 15H if you're a senior citizen) tells the bank not to deduct TDS — though the interest is still taxable if your income later crosses the threshold.
• PPF and a few government schemes are the exception, with tax-exempt interest under the EEE structure. This calculator doesn't distinguish taxable from exempt products, so check your specific scheme.

Different tenures (same P, R, frequency)

Different rates (same P, T, frequency)

Different principals (same R, T, frequency)

Line these three up and a pattern falls out: tenure and rate both move maturity in a curve, since they feed the exponent, while principal moves it in a straight line, since it only ever multiplies. That's why starting a few years earlier usually beats waiting to invest a slightly larger amount later — time is doing work the extra rupees alone can't.

₹7,34,664 is a nominal figure — it says nothing about what that money can actually buy5 years from now. As a rough illustration, at 6% average annual inflation over the period, the real purchasing power of ₹7,34,664 works out to about ₹5,48,984 in today's terms — a meaningfully smaller number, and the gap widens the longer the money sits.

A rough real rate of return is nominal rate minus inflation rate. At 8% nominal against 5-6% inflation, what's left over is only a few percentage points — a reminder not to treat the headline maturity figure as guaranteed future purchasing power, and part of why long-term investors often look past pure fixed-rate products toward assets with a better shot at outrunning inflation, accepting more volatility in exchange.

• Reading the nominal rate as the real return. 8% nominal, compounded 1 time(s) a year, actually delivers about 8.00% — using the nominal figure directly in a growth comparison understates what you'd actually earn.
• Using the annual rate as the period rate. When compounding n times a year, each period gets R/(100n), not R/100 — an easy slip when working the formula by hand.
• Treating the Rule of 72 as exact. It's a fast approximation, most reliable near 6-10% annual rates — for anything that actually matters, run the full formula.
• Forgetting tax. Interest from most compounding deposits in India is taxed at your slab rate, with TDS possible above a threshold — every figure here is pre-tax.
• Assuming a real product compounds this cleanly. Actual bank conventions, day-count rules, and minimum-balance requirements can nudge real numbers away from this idealized formula.
• Comparing offers on rate alone. Two quotes are only truly comparable once tenure and compounding frequency match too, or both are converted to the same effective annual basis.

This calculator models pure compound interest. Real Indian savings products build on the same idea but add their own rules:

Use this calculator to get the mechanics straight, then check the actual scheme's compounding frequency, tax treatment, lock-in, and premature-withdrawal rules before comparing products head-to-head. Many banks also offer a non-cumulative FD, paying interest out periodically instead of reinvesting it — once withdrawn, that payout stops compounding inside the account, so the product behaves closer to simple interest from the depositor's side unless they reinvest each payout elsewhere themselves.

₹5,00,000 at a nominal 8%, compounded 1 time(s) a year for 5 years, is projected to reach about ₹7,34,664 — an effective annual rate near 8.00%. The mechanism worth remembering is simple: interest earning its own interest is what turns small differences in rate, frequency, or tenure into outsized differences in outcome over long stretches. The sensitivity tables above show exactly how much each lever is worth on its own — and the same mechanism that builds wealth for a saver compounds unpaid debt for a borrower just as fast, which is worth remembering on both sides of the ledger.

All figures are computed live from the principal, nominal rate, tenure, and compounding frequency you entered, using A = P × (1 + R/(100n))^(n×t). The sensitivity tables recompute the same formula at nearby tenure, rate, and principal values; the Rule of 72 estimate and exact doubling time are both derived from your specific rate. Nothing here reflects a specific bank or investment product's actual terms, TDS treatment, or compounding convention — check the scheme documentation before relying on these numbers for a real decision.