Quick answer
Compound interest earns interest on both your principal and past interest. A = P × (1 + r/n)n×t. ₹1 lakh at 8% compounded quarterly becomes about ₹2.21 lakh in 10 years. The same deposit earns only ₹1.8 lakh with simple interest.
Key takeaways
- More frequent compounding gives a slightly higher effective rate.
- Time has the biggest effect. Interest in the final years is much larger than in the early years.
- Indian bank FDs usually compound quarterly.
Compound interest formula
A = P × (1 + r/n)n × t; CI = A − P- P = principal
- r = annual rate (decimal)
- n = compounding periods per year
- t = years
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is paid only on the principal. Compound interest is also paid on interest already earned, so it grows faster the longer you stay invested.
How is quarterly compounding calculated?
The annual rate is divided by 4 and applied four times a year. At 8%, that is 2% per quarter, an effective yearly rate of 8.24%.
Sources & methodology
Formulas follow the standard methods used by Indian banks, fund houses and government schemes. Rates and tax rules were checked against official sources on 1 October 2026. Read our methodology.
This calculator gives an estimate for planning purposes. Actual returns, tax and eligibility depend on your situation and on product terms. It is not financial advice.