Simple Interest Calculator
Work out simple interest and the total amount for any principal, rate and time, and see how much more the same rate would earn with compounding.
₹1,00,000 at 8% simple interest for 3 years earns ₹24,000. Compounded yearly, the same rate would earn ₹25,971.
Simple interest is charged only on the original amount. Most bank deposits and loans in India compound, so use this for informal loans, some short-term deposits and checking textbook sums.
What is simple interest?
Simple interest is interest charged or earned only on the original amount (the principal), never on interest already added, so it grows by the same amount every year. ₹1 lakh at 8% simple interest earns exactly ₹8,000 every year, however long you keep it.
Simple interest formula
SI = P × R × T ÷ 100 and Total amount = P + SI
- P = principal
- R = rate (% a year)
- T = time in years (6 months = 0.5)
Worked example
₹1,00,000 at 8% a year for 3 years:
- SI = 1,00,000 × 8 × 3 ÷ 100 = ₹24,000
- Total amount = ₹1,24,000
How to calculate simple interest for months and days
Convert the time to years: months ÷ 12, or days ÷ 365. For days, the formula becomes SI = P × R × days ÷ 36,500.
- ₹50,000 at 9% for 8 months: 50,000 × 9 × (8 ÷ 12) ÷ 100 = ₹3,000
- ₹50,000 at 9% for 73 days: 50,000 × 9 × 73 ÷ 36,500 = ₹900
What does “2 rupee interest” mean?
In informal lending, “2 rupees interest” (do rupaye byaj) means ₹2 per ₹100 per month, which is 24% a year as simple interest. “1 rupee” is 12% a year and “3 rupees” is 36% a year.
Borrowing ₹50,000 at 2 rupees for 8 months costs 50,000 × 2 ÷ 100 × 8 = ₹8,000. At 24% a year, this is costlier than almost any bank personal loan, so compare before borrowing from a moneylender.
How to find principal, rate or time
Rearrange the same formula:
- Rate R = SI × 100 ÷ (P × T). ₹12,000 interest on ₹50,000 over 3 years is a rate of 8%.
- Principal P = SI × 100 ÷ (R × T).
- Time T = SI × 100 ÷ (P × R).
Money doubles under simple interest when SI equals P, which takes 100 ÷ R years: 12.5 years at 8%. With yearly compounding at 8%, it doubles in about 9 years.
Simple interest vs compound interest
Simple interest is earned on the principal only; compound interest is also earned on past interest, so it grows faster the longer the money stays invested.
| ₹1 lakh at 8% | Simple interest | Compounded yearly |
|---|---|---|
| 3 years | ₹24,000 | ₹25,971 |
| 10 years | ₹80,000 | ₹1,15,892 |
For a deposit, compounding works for you. For a loan, simple interest on a shrinking balance is fine; simple interest on the full original amount is not, as the next section shows.
Watch out for flat-rate loans
A flat rate charges simple interest on the full loan for the whole tenure, even though you repay part of it every month. A ₹1 lakh loan at 10% flat for 3 years means ₹30,000 interest and an EMI of about ₹3,611, which equals a reducing-balance rate of about 17.9%. Some consumer, two-wheeler and informal loans are quoted this way. Always ask for the reducing-balance rate or the APR, which the lender must show in the Key Fact Statement.
Where simple interest is used in India
- Interest on late tax: income tax charges simple interest of 1% a month on advance tax paid late, and GST charges 18% a year on tax paid late. ₹50,000 of GST paid 20 days late costs about ₹493 in interest.
- Informal and moneylender loans, usually quoted in rupees per hundred per month.
- Flat-rate consumer loans, as above.
- School and competitive-exam maths.
Bank FDs, RDs, PPF and almost all bank loans compound or use a reducing balance, so use the calculators below for those.
When to use a different calculator
- Interest that compounds? Use the Compound Interest Calculator.
- A bank deposit? Use the FD Calculator or the RD Calculator.
- A loan repaid in EMIs? Use the Personal Loan EMI Calculator.
Sources
This is general information, not tax or investment advice. See how we check rates and our corrections log.
