Deposit Interest Calculator India

Compound Interest Formula:

\[ A = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Principal Amount (P):

₹

Annual Interest Rate (r):

Compounding Frequency (n):

Time Period (t):

years

Future Value (A):

Interest Earned:

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1. What is Compound Interest?

Compound interest is the interest calculated on the initial principal and also on the accumulated interest of previous periods. It allows your savings to grow faster over time as you earn interest on both your original investment and the interest that investment has already earned.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

\[ A = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Where:

\( A \) — Future value of the investment (₹)
\( P \) — Principal amount (₹)
\( r \) — Annual interest rate (decimal)
\( n \) — Number of times interest is compounded per year
\( t \) — Time the money is invested for (years)

Explanation: The formula calculates how much your investment will grow over time with compound interest, taking into account the compounding frequency.

3. Importance of Compound Interest Calculation

Details: Understanding compound interest helps in financial planning, investment decisions, and retirement planning. It shows how small, regular investments can grow significantly over time.

4. Using the Calculator

Tips: Enter principal amount in ₹, annual interest rate in percentage, select compounding frequency, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest.

Q2: How does compounding frequency affect returns?
A: More frequent compounding (monthly vs annually) results in higher returns because interest is calculated more often.

Q3: Are there taxes on interest earned?
A: Yes, interest earned on deposits is taxable income in India under the Income Tax Act.

Q4: What are typical interest rates in India?
A: Fixed deposit rates in India typically range from 3% to 7% depending on the bank and deposit tenure.

Q5: Can I use this for recurring deposits?
A: This calculator is for lump-sum deposits. For recurring deposits, a different formula is needed that accounts for regular contributions.