Simple Interest Calculator
Calculate simple interest on a principal for any rate and period, and see how it compares with compound interest over the same term.
Simple Interest
₹40,000
on ₹1,00,000 at 8% for 5 years
Total amount (P + SI)
₹1,40,000
Compound interest, same inputs (annual)
₹46,933
Pin this scenario, change the inputs, and compare side by side.
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Tools that naturally follow this calculation.
Simple vs compound growth
- Compound (annual)
- Simple interest
Year-by-year
| Year | Simple Interest | Total |
|---|---|---|
| 1 | ₹8,000 | ₹1,08,000 |
| 2 | ₹16,000 | ₹1,16,000 |
| 3 | ₹24,000 | ₹1,24,000 |
| 4 | ₹32,000 | ₹1,32,000 |
| 5 | ₹40,000 | ₹1,40,000 |
Example calculation
₹1,00,000 × 8% × 5 years ÷ 100 = ₹40,000 of simple interest, so the total becomes ₹1,40,000. With annual compounding instead, the interest over the same period would be about ₹46,933.
Simple interest formula
SI = P × R × T / 100
where P is the principal, R the annual interest rate in percent and T the time in years. The total amount is P + SI.
Where simple interest is used
Simple interest appears in short-term loans, some deposit products, informal lending, and as a teaching baseline. Most bank deposits and loans in India actually compound, so always check which method a product uses.
Simple vs compound interest
Simple interest is charged only on the original principal, so it grows in a straight line. Compound interest also earns interest on past interest, so the gap between the two widens every year — the comparison figure above shows this for your inputs.
Worked example: a 2-year loan
A friend lends you ₹50,000 for 2 years at 9% simple interest a year.
SI = 50,000 × 9 × 2 ÷ 100 = ₹9,000, so you repay ₹59,000 in total. Each year costs exactly ₹4,500, regardless of how much you still owe.
For a period in months, convert to years first: 18 months is 1.5 years, so the interest would be 50,000 × 9 × 1.5 ÷ 100 = ₹6,750.
If the same ₹50,000 compounded annually at 9% instead, the total after 2 years would be 50,000 × 1.09² = ₹59,405 — ₹405 more, because year-2 interest is also charged on year-1 interest.
Rearranging the formula
The same equation answers other questions:
- Rate:
R = SI × 100 ÷ (P × T)— e.g. ₹6,000 interest on ₹40,000 over 3 years implies 5% a year. - Time:
T = SI × 100 ÷ (P × R) - Principal:
P = SI × 100 ÷ (R × T)
These are useful for checking a quoted loan or deposit against what you were actually charged or paid.
Limitations
Most formal Indian loans use reducing-balance EMIs rather than flat simple interest, so use the EMI calculator for bank or NBFC loans. Some lenders quote a 'flat rate' that looks like simple interest but is charged on the full original amount even as you repay — the effective reducing-balance cost is roughly 1.8–1.9× the flat rate depending on tenure. This calculator does not model fees, penalties, or taxes on interest earned.
Assumptions & what this calculator does not include
- •Interest is calculated only on the original principal.
- •The rate stays constant for the whole period.
- •Fractional years are allowed and pro-rated linearly.
- •Fees, penalties and taxes are not modelled.
Frequently asked questions
Methodology last reviewed: 16 October 2026
How we maintain this page: the formula is covered by automated tests, default rates that depend on government notification are re-checked when a revision is announced, and the content and links are re-read when a reader reports an issue or the page is edited. See our Calculator Methodology and Corrections Policy.