School taught me simple interest first. Principal times rate times years, divide by 100. I still do that on a paper when I am lazy. Then a FD receipt did not match my paper and I thought the bank rounded it wrong.
They did not. They compounded. Same 8 percent is two different piles of money once time goes past a year.
I put 1,00,000 on the Compound Interest Calculator so the gap is visible. The page even prints If it was simple interest next to the compound amount. I did not need a second tool.
Same 1 lakh, same 8 percent, two formulas
Principal is 100000.
Yearly rate is 8.
Time is years. I start with 5 because that is when the gap starts looking like a phone bill, not like coins.
Compounding dropdown, I pick Yearly first. Then Quarterly. Then Monthly. Simple interest does not care about this dropdown. Compound does.
Hit Calculate. Compound amount, Compound interest, If it was simple interest, Extra from compounding.
Simple on 1 lakh at 8 percent for 5 years is ₹1,40,000. That is 8,000 a year times 5, no extra. Compound yearly is about ₹1,46,933. Extra from compounding about ₹6,933. That extra is interest sitting on older interest.
This is an estimate, not an official figure.
Dont put a monthly rate in Yearly rate. 0.67 instead of 8 will make a joke result. I have seen that when someone divides 8 by 12 themselves and also picks Monthly compounding. Double counting.
This box is lumpsum only. Extra deposits are not here. SIP and RD have their own pages.
Year 1 looks same, year 5 and year 10 do not
1 year, 1,00,000, 8 percent.
Simple ₹1,08,000. Yearly compound ₹1,08,000. Same. No leftover year for interest to eat itself. Quarterly compound about ₹1,08,243. Monthly about ₹1,08,300. Even in year 1, frequency adds a little if they compound inside the year.
3 years. Simple ₹1,24,000. Yearly compound about ₹1,25,971. Extra about ₹1,971. Quarterly about ₹1,26,824. Monthly about ₹1,27,024.
5 years. Simple ₹1,40,000. Yearly about ₹1,46,933. Extra about ₹6,933. Quarterly about ₹1,48,595. Monthly about ₹1,48,985.
10 years. Simple ₹1,80,000. Yearly about ₹2,15,892. Extra about ₹35,892. Quarterly about ₹2,20,804. Monthly about ₹2,21,964.
Read that 10 year line again. Simple says you earned 80,000. Yearly compound says you earned about 1,15,892. The word 8 percent stayed the same. Time did the work.
This is why uncle's FD napkin was low in FD of 2 lakh for 5 years. He used simple. The FD page uses compound with a compounding dropdown, quarterly by default.
SIP is also compound, on monthly puts, and the return is assumed. SIP of 3,000 for 10 years and is 12 percent SIP return a safe assumption. Dont take my 8 percent 1 lakh example and call it a mutual fund promise.
Where simple interest still shows up in real life
Some gold loan shops and some old-style informal lending still talk simple. Some short deposits advertise in a simple way and pay compound, which is how arguments start.
A lot of school word problems are simple. Your salary account is not paying you simple 8. Your FD is not simple if it is cumulative.
Loans are a third animal. Home loan and personal loan interest is usually reducing balance. You pay EMI, principal falls, interest is on what is left. That is not this compound-on-a-deposit box, and it is not simple on the full 5 lakh for 20 years either. If someone says 9 percent simple on a 20 year home loan, they are scaring you with a wrong formula. Use the EMI Calculator. If the schedule still looks weird, I opened the EMI schedule and still dont get total interest.
I dont use this compound page to price a loan. I use it when I have a chunk sitting, or when I want to show a cousin why 8 percent for 10 years is not 80,000 extra for sure, it depends which 8 percent.
Daily compounding is not in the dropdown. Monthly is the finest we go. For home use, daily and monthly sit close.
Half yearly is there if a bond or a old FD says so. Pick it. Compare with Yearly. The Extra from compounding line will move.
Frequency is the quiet extra knob
Same 8 percent, 5 years, 1 lakh.
Yearly ₹1,46,933. Quarterly ₹1,48,595. Monthly ₹1,48,985.
The jump from yearly to quarterly is about ₹1,662. Quarterly to monthly is about ₹390. People fight over monthly like it is a lottery. It is a few hundred on 1 lakh in 5 years at 8 percent. On 10 lakh it is ten times that, still not a new bike.
On 10 years the frequency gap grows. Yearly ₹2,15,892 versus monthly ₹2,21,964. About ₹6,072. Now it is a flight ticket. Still the same 8 percent on the tin.
Bank FD quarterly versus this yearly compound is why two screenshots disagree. Align the Compounding box before you say the site is wrong.
If you change Time from 5 to 5.25, that is allowed. The field accepts 0.25 steps. Odd tenures, pick what the receipt says.
Principal 1,00,000 is my demo. Type your own 2,50,000 or 50,000. The extra from compounding scales. The story stays.
I still do simple on a napkin when I only need a rough floor. Then I open this page when the amount is big enough that ₹7,000 extra matters. 1 lakh for 5 years, ₹6,933 extra, I would bother. 10,000 for 1 year, I would not hold a meeting.
One more demo I run when a cousin says 8 percent is 8 percent. I type Principal 200000, Yearly rate 8, Time 5, Compounding Yearly. Simple would be ₹2,80,000. Compound yearly is a bit over ₹2.93 lakh. Same rate, double principal, extra from compounding is also roughly double the 1 lakh case. The story scales. The formula does not change.
If they then pick Quarterly on that 2 lakh, the amount ticks up again. That is the same move as the FD compounding dropdown. I send them to the FD page if the money is actually going into a bank deposit. This page is the clean formula. FD is the product wrapper.
A mistake I still make when I am in a hurry, I leave Compounding on Monthly from the last run and I compare it with a yearly FD screenshot. Then I argue with the app. Change the dropdown back. One box, one argument gone.
Another mistake, using Time as 60 because I am thinking months. This field is years. 60 years of 8 percent on 1 lakh is a fantasy number. 5 means 5.
Fill it, read the simple line, then stop mixing products
Principal 100000.
Yearly rate 8.
Time 5, then 10 if you want the scare.
Compounding Yearly, then Quarterly.
Read Compound amount. Read If it was simple interest. The gap is Extra from compounding.
Dont use this for reducing loans. Dont type a SIP monthly amount in Principal and expect SIP math. Dont put 8/12 in the rate box.
Same 8 percent. Two formulas. On 1 lakh for 5 years you are looking at 1.40 lakh versus about 1.47 lakh yearly compound. I send that pair to anyone who says interest is interest, what is the drama. The drama is ₹7,000 on a small ticket, and ₹35,000 extra by year 10, and a much louder number when the principal is a house down payment sitting in the wrong formula.
That is the real difference. Not a textbook paragraph. Two lines on this page.