The formula: A = P × (1 + r/n)^(n×t)
n is how many times per year interest compounds. For ₹1,00,000 at 8% over 5 years, compounded monthly (n=12): the maturity amount is ₹1,48,984.57 — ₹48,984.57 in interest.
The same inputs, compounded daily instead
Compounded daily (n=365) instead of monthly, the same ₹1,00,000 at 8% over 5 years grows to ₹1,49,175.93 — ₹49,175.93 in interest, ₹191.36 more than monthly compounding earned over the same period.
Why more frequent compounding earns (a little) more
Compounding daily means interest gets calculated and added to the balance 365 times a year instead of 12 — each of those smaller additions starts earning its own interest sooner than it would under monthly compounding, so the balance edges up faster.
Why the gap is small, not dramatic
Going from 12 compounding periods a year to 365 is a huge increase in frequency, yet the extra interest earned is a small fraction of the total — this is a general pattern: increasing compounding frequency has rapidly diminishing returns once you're already compounding fairly often, since the underlying annual rate is what dominates the result.