Calculate simple interest on a deposit or loan. Simple interest is charged only on the original principal, so it grows in a straight line rather than compounding.
The principal is multiplied by the annual rate and the number of years.
Dividing by 100 converts the percentage into a decimal.
Because interest is always charged on the original principal, doubling the time exactly doubles the interest.
Simple interest: SI = P × R × T ÷ 100
Total amount: A = P + SI
P, R, T: Principal, annual rate %, time in years
The simple interest calculator finds the interest earned or charged when interest is calculated only on the original principal. You enter the principal, the annual rate and the time in years, and it returns the interest and the total amount at the end.
Simple interest is the first interest concept taught in Indian schools, and it remains in everyday use. Informal loans between friends and family, some short-term loans, interest on delayed payments and non-cumulative deposits that pay interest out regularly all follow its logic. Because the interest is the same every year, it is also the easiest to check by hand.
The calculator answers how much interest accrues on a fixed sum at a given rate over a given time, without any interest being added back to the principal.
1. Write down the principal P, the annual rate R% and the time T in years.
2. If time is given in months, divide by 12; if in days, divide by 365.
3. Compute simple interest: SI = P × R × T ÷ 100.
4. Compute the total amount: A = P + SI.
5. To find a missing quantity, rearrange: P = SI × 100 ÷ (R × T), R = SI × 100 ÷ (P × T), or T = SI × 100 ÷ (P × R).
In simple interest, every year adds the same amount, P × R ÷ 100. The total amount after T years is P × (1 + R × T ÷ 100), which is a straight line when plotted against time. Doubling the time doubles the interest, and doubling the rate does the same. At 8%, money takes 12.5 years to double under simple interest, since 100 ÷ 8 = 12.5. This linearity makes simple interest easy to reason about, and it is why school problems can be solved by proportion.
Under compound interest, interest earned is added to the principal and itself earns interest. For one year, simple and compound interest at an annual rate are equal. After that, compound interest pulls ahead, and the gap grows with time. For ₹1,00,000 at 8% for 10 years, simple interest gives ₹80,000, while yearly compounding gives about ₹1,15,892. Simple interest is effectively what you get when interest is paid out each period rather than reinvested, as with a deposit that pays monthly or quarterly interest to your account.
Simple interest is appropriate for short periods and for arrangements where interest is paid out regularly. It underlies the flat-rate method some lenders use for loans, where interest is charged on the full original amount for the whole tenure even as you repay. That use makes a loan much more expensive than its headline rate suggests, because you pay interest on money you have already returned. For deposits held for several years with interest reinvested, compound interest is the correct model.
Mohan lends ₹2,00,000 to his cousin for 3 years at 7.5% simple interest a year, with the full amount and interest to be repaid at the end.
Write the formula: SI = P × R × T ÷ 100
Substitute your values: SI = 200000 × 7.5 × 3 ÷ 100
Interest: 4500000 ÷ 100
Total amount: 200000 + 45000
Answer: Total amount ₹2,45,000; Principal ₹2,00,000; Interest earned ₹45,000
Using months directly as T without dividing by 12.
Writing the rate as 0.075 and still dividing by 100, which shrinks the answer a hundredfold.
Applying simple interest to multi-year deposits where interest is actually compounded.
Comparing a flat-rate loan quote with a reducing-balance rate as if they were equal.
Settling interest on informal loans between family or friends.
Calculating interest on delayed payments or short-term advances.
Checking interest paid out on non-cumulative deposits.
Solving school and competitive exam problems on interest.
What is the difference between simple and compound interest?
Simple interest is always worked out on the original amount. Compound interest is worked out on the original amount plus interest already added, so it grows faster. Over a long time, this difference becomes very large.
Where is simple interest actually used in India?
It is mostly used in short-term loans, some car and personal loans that use a flat rate, and some fixed deposits that pay out interest instead of adding it back. Most savings products use compound interest instead.
Is a flat interest rate the same as simple interest?
Yes, more or less. This is why flat rates can be confusing for loans. A flat 10% loan costs much more than a 10% reducing-balance loan, because you keep paying interest on the full original amount, even after you have paid back most of it.