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Compound Interest Formula:
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Compound interest for monthly investment calculates the future value of regular monthly investments where interest is compounded. It's a powerful concept for wealth creation, especially in the Indian investment context where systematic investment plans (SIPs) are popular.
The calculator uses the compound interest formula:
Where:
Explanation: This formula calculates the future value of a series of equal monthly payments (annuity) where each payment earns compound interest.
Details: Understanding compound interest helps Indian investors plan their SIP investments, retirement savings, and long-term financial goals. It demonstrates how regular investments can grow significantly over time through the power of compounding.
Tips: Enter monthly investment amount in ₹, monthly interest rate as a percentage (e.g., 1 for 1%), and number of months. All values must be positive numbers.
Q1: How is this different from simple compound interest?
A: This formula calculates compound interest on regular monthly investments, while simple compound interest typically calculates growth on a single lump sum investment.
Q2: What's a typical monthly interest rate in India?
A: Monthly rates vary by investment type. For equity SIPs: ~0.8-1.5% (annual 10-18%), for debt funds: ~0.5-0.8% (annual 6-10%), for FDs: ~0.5-0.7% (annual 6-8.5%).
Q3: Should I use monthly or annual rate?
A: This calculator uses monthly rate. Convert annual rate to monthly by dividing by 12 (e.g., 12% annual = 1% monthly).
Q4: Are there tax implications in India?
A: Yes, returns are taxable based on investment type and holding period. Equity investments: LTCG tax after 1 year, debt investments: taxed as per income slab.
Q5: How accurate is this for real Indian investments?
A: This provides a mathematical estimate. Actual returns may vary due to market fluctuations, expense ratios, and taxes in the Indian context.