1. What is Compound Interest?

Compound interest is the interest on a deposit calculated based on both the initial principal and the accumulated interest from previous periods. It's how money grows in savings accounts and fixed deposits over time.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( A \) — Final amount (INR)
• \( P \) — Principal amount (INR)
• \( R \) — Monthly interest rate (annual rate / 12, as a decimal)
• \( N \) — Number of compounding periods (months)

Explanation: The formula accounts for exponential growth of money by applying interest to both the principal and previously earned interest.

3. Importance of Compound Interest

Details: Understanding compound interest helps in financial planning, comparing investment options, and maximizing returns on savings and fixed deposits.

4. Using the Calculator

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

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 the principal plus accumulated interest.

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

Q3: What are current HDFC interest rates?
A: As of [current date], HDFC offers [X]% for savings accounts and [Y]% for fixed deposits (check official HDFC website for latest rates).

Q4: Are there taxes on interest earned?
A: Yes, interest earned is taxable as per your income tax slab. TDS may be deducted for fixed deposits if interest exceeds ₹40,000 (₹50,000 for seniors).

Q5: Can I use this for other banks?
A: Yes, the formula is universal, but you should input the specific interest rates offered by other banks.