Simple Interest
Key takeaways
- ₹1.00 L at 8% flat earns ₹8,000 every year — ₹40,000 over 5 years, for ₹1.40 L in all.
- Compounded annually, the same rate would earn ₹46,933 — ₹6,933 more than simple interest.
- Simple interest is linear: 10 years earns exactly double — ₹80,000.
Yearly schedule
| Year | Principal | Interest | Balance |
|---|---|---|---|
| 1 | ₹1.00 L | ₹8,000 | ₹1.08 L |
| 2 | ₹0 | ₹8,000 | ₹1.16 L |
| 3 | ₹0 | ₹8,000 | ₹1.24 L |
| 4 | ₹0 | ₹8,000 | ₹1.32 L |
| 5 | ₹0 | ₹8,000 | ₹1.40 L |
About the Simple Interest
Simple interest is interest charged only on the original principal, not on any interest already earned — so it grows in a straight line. It is common in short-term loans, some fixed deposits and many everyday lending arrangements.
Enter the principal, annual rate and time, and this calculator shows the simple interest and the total amount payable.
Frequently asked questions
How is simple interest calculated?
Simple Interest = Principal × Rate × Time ÷ 100, where rate is per year and time is in years. ₹1,00,000 at 8% for 3 years gives ₹24,000 of interest, for a total of ₹1,24,000.
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal, so it is the same each year. Compound interest is calculated on the principal plus accumulated interest, so it grows faster. Over long periods, compound interest pulls far ahead.
Where is simple interest used?
In many car and personal loans, short-term and informal loans, and some deposits or bonds that pay interest out rather than reinvesting it. Most long-term savings, though, use compound interest.
How do I find the total amount payable?
Add the simple interest to the principal: Total = Principal + Simple Interest. This is what you repay on a loan or receive at maturity on a deposit.
Can the time be in months?
Yes — convert months to years by dividing by 12. For 6 months, use 0.5 years. This calculator works in years, so enter fractional years for shorter periods.
Disclaimer: This calculator is for information and education only. It is not investment advice and not a recommendation. Where a rate or a price is an input, it is an assumption, and actual rates vary. It does not take your personal circumstances into account. Every figure is computed solely by applying the formula and assumptions stated on this page to the inputs you entered.