The upcoming 50 kt magnetized iron calorimeter (ICAL) detector at the India-based Neutrino Observatory (INO) is designed to study the atmospheric neutrinos and antineutrinos separately over a wide range of energies andpath lengths. The primary focus of this experiment is to explore the Earth matter effects by observing the energy and zenith angle dependence of the atmospheric neutrinos in the multi-GeV range. This study will be crucial toaddress some of the outstanding issues in neutrino oscillation physics, including the fundamental issue of neutrino mass hierarchy. In this document, we present the physics potential of the detector as obtained from realistic detector simulations.We describe the simulation framework, the neutrino interactions in the detector, and the expected responseof the detector to particles traversing it. The ICAL detector can determine the energy and direction of the muons to a high precision, and in addition, its sensitivity to multi-GeV hadrons increases its physics reach substantially. Itscharge identification capability, and hence its ability to distinguish neutrinos from antineutrinos, makes it an efficient detector for determining the neutrino mass hierarchy. In this report, we outline the analyses carried out for the determination of neutrino mass hierarchy and precision measurements of atmospheric neutrino mixing parameters at ICAL, and give the expected physics reach of the detector with 10 years of runtime. We also explore the potential of ICAL for probing new physics scenarios like CPT violation and the presence of magnetic monopoles.