The Power of Compounding in Nepal’s Economy
Albert Einstein famously called compound interest the “eighth wonder of the world.” For investors in Nepal, understanding how this works can mean the difference between a small saving and a massive retirement fund.
Compound Interest Formula
Our calculator uses the standard periodic compounding formula:
A = P (1 + r/n)^(nt)
- A: The final amount (Maturity)
- P: Principal amount
- r: Annual interest rate (decimal)
- n: Compounding frequency (e.g., 4 for Quarterly)
- t: Number of years
Compounding Frequency in Nepal
Most commercial banks in Nepal, such as Nabil, NIC Asia, and Global IME, calculate interest on a Quarterly Basis for both Savings and Fixed Deposits. This results in a higher annual yield than simple interest. For example, a 10% annual rate compounded quarterly actually gives you an effective yield of 10.38%.
Tax Tip: Similar to Fixed Deposits, any interest earned from compounding savings in Nepal is subject to a 5% TDS (Tax Deducted at Source) for natural persons. This tax is automatically calculated in the “Post-Tax” field of our tool.