Compound Interest Calculator

1. The Compound Interest Formula

The core equation is:

A = P × (1 + r)^t

Where P is your principal, r is the annual interest rate (as a decimal), and t is the number of years. Each year, interest is added to your balance — and the next year's interest is calculated on the new, larger balance. That's compounding. This calculator assumes annual compounding (interest credited once a year).

2. Inflation Adjustment

Money in 5 years won't have the same purchasing power as today. Real value discounts the maturity by inflation:

Real Value = Post-Tax Maturity ÷ (1 + inflation)^t

The "real return rate" is what you actually earn after inflation:

Real Return = (1 + nominal) ÷ (1 + inflation) − 1

3. Tax on Gains

This calculator applies a flat 12.5% LTCG rate to the interest earned. This aligns with India's long-term capital gains tax on equity and equity-oriented instruments:

Tax = Interest × 12.5%

For other instruments (FDs, RDs, debt funds post-2023), interest is taxed at your income-tax slab rate, which is typically higher. The 12.5% used here is a conservative estimate for long-term investors.

4. Doubling Time

The exact time for your money to double, using logarithms:

Doubling Time = ln(2) ÷ ln(1 + r)

At 12% annual return, money doubles in about 6.12 years.

Caveats

All projections assume a constant interest rate over the entire tenure. Real-world rates change — FD renewals reset to current rates, MF returns vary year to year. The 12.5% tax assumption is a simplification; actual tax may differ based on instrument type, holding period, and your income slab.