Download Fillable Format Forms
LTCG Tax Calculator: Tax on Shares / Mutual Fund
Check Your Tax after Budget

Compound Interest Formula and Facts



What is Compound Interest?

Interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as "interest on interest," and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount. The rate at which compound interest accrues depends on the frequency of compounding; the higher the number of compounding periods, the greater the compound interest.

Let Principal = P , Rate = R % per annum and Time = n years.
  1. Annual Compound Interest Formula:
    Amount = P(1+R/100)n

    Note- if interest is calculated annually, then compound interest is equal to simple interest

  2. Half Yearly Compound Interest Formula: When interest is compounded half yearly, then
    Amount = P[1+(R/2)/100]2n

    Note-When the interest is compounded (interest calculated and added to principal) half yearly, then the rate will be half and time will be twice.

  3. Quarterly Compound Interest Formula:
    When interest is compounded Quarterly, then
    Amount = P[ 1+(R/4)/100]4n

    Note-when the interest is compounded quarterly, then rate will be quarter and time will be 4 times.

    Note-When the interest is compounded monthly,

    then A=P{1+(r/1200)}12n

  4. When interest is compounded Annually but time is in fraction, say 3(2/5)years.
    then Amount will be,
    Amount = P(1+R/100)3 x (1+(2R/5)/100)
  5. When Rates are different for different years, say R1%, R2%, R3% for 1st, 2nd and 3rd year respectively. Then Amount will be,
    Amount=P(1+R1100)(1+R2100)(1+R3100)
  6. Present worth of Rs. x due n years hence will be:
    Present Worth = x/(1+(R/100))n