Does daily compounding earn much more than annual?

Less than most people assume. On ₹1,00,000 at 8% for 5 years, annual compounding gives ₹1,46,933 and daily gives ₹1,49,176 — a difference of about 1.5%. The time period matters far more than the frequency.

How do I use this for a fixed deposit?

Enter the deposit amount as the principal, the rate from the FD certificate, the term in years, and the compounding frequency stated in the terms (Indian banks most often compound quarterly). The maturity amount shown is before tax.

Finance

Compound Interest Calculator

See how an amount grows when interest earns interest, and how much difference the compounding frequency really makes.

Updated 3 Sep 2026

Principal amount

Annual interest rate

Time period

years

Compounding frequency

Maturity amount ₹148,594.74

Interest earned ₹48,594.74

Gain over simple interest ₹8,594.74

Rate per period0.02

Periods (n×t)20

Growth factor1.485947

100,000.00 invested at 8.00% compounded quarterly for 5 years grows to 148,594.74. That is 48,594.74 in interest — 8,594.74 more than simple interest would have produced over the same period.

Quick answer

Enter your principal, the annual rate, the time period and how often interest compounds. The calculator returns the maturity amount, the interest earned, and how much more that is than simple interest over the same period.

What is the Compound Interest Calculator?

Compound interest is interest calculated on the principal and on the interest already accumulated. Unlike simple interest, which only ever applies to the original amount, compounding causes growth to accelerate over time.

How to use the Compound Interest Calculator

Enter the principal you are investing or depositing.
Enter the annual interest rate.
Enter the time period in years.
Choose how often interest is compounded — this is usually stated in the product terms.

Formula

A = P × (1 + r/n)^(n × t)

A = final amount
P = principal
r = annual interest rate as a decimal
n = compounding periods per year
t = time in years

Interest earned = A − P

The rate is divided by the number of compounding periods and the exponent is multiplied by the same number. More frequent compounding means a smaller rate applied more often, which produces a slightly larger result — though the gain from quarterly to daily compounding is much smaller than most people expect.

How the calculation works

At each compounding point, interest is calculated on the current balance and added to it. The next calculation then uses that larger balance. Over many periods this creates exponential rather than linear growth.

Time matters far more than frequency. Doubling the years transforms the outcome; moving from annual to monthly compounding changes it by a fraction of a percent.

Worked example

₹1,00,000 at 8% per year for 5 years, compounded quarterly:

Rate per period = 0.08 ÷ 4 = 0.02
Number of periods = 4 × 5 = 20
Growth factor = 1.02²⁰ = 1.485947
Maturity amount = ₹1,48,594.74

Interest earned is ₹48,594.74. Simple interest on the same terms would have produced ₹40,000, so compounding added ₹8,594.74.

Uses and benefits

Check the maturity value a bank quotes on a fixed deposit.
Compare products where rate and compounding frequency both differ.
See the real cost of leaving a debt to compound against you.

Frequently asked questions

Simple interest is always calculated on the original principal only. Compound interest is calculated on the principal plus all interest accumulated so far, so the base grows each period. Over short periods the difference is small; over decades it is enormous.

References

Deposit interest may be taxable in your jurisdiction, and the figures here are before tax. Some products also compound on a day-count basis that differs slightly from the simple periodic model used in the standard formula.