Simple Interest Calculator (India)

How to use this simple interest calculator

1. Enter the principal, the amount you deposit, lend or borrow.
2. Enter the annual interest rate. If you have been quoted a monthly rate, multiply it by 12 first.
3. Choose the unit under "Time in": years, months or days.
4. Enter the time in that unit. Days are converted with a 365-day year.

The result shows the simple interest and the total amount, the interest per year, month and day, and what the same rate would earn if it compounded quarterly. A chart and a table compare the two over time.

The simple interest formula

Because interest is only ever worked out on the original principal, you earn or pay the same amount every year, and the balance grows in a straight line. With quarterly compounding, the interest for each quarter is added to the balance and earns interest of its own, so the balance curves upwards.

Simple vs quarterly compounding over time

Interest on ₹1 lakh at 7% a year:

Over a single year the difference is small. Over ten years, compounding earns about 43% more interest than simple interest at the same rate. For short periods the two match: over 90 days, both give ₹1,726.03, because no interest is added to the balance until the first quarter ends.

Flat rate vs reducing balance on loans

Simple interest matters most when you borrow. Indian loans are normally repaid in monthly EMIs on a reducing balance, so you pay interest only on what you still owe. Some personal and car loans, however, are quoted at a flat rate: simple interest on the original amount for the whole tenure, even after you have repaid much of it. A flat rate costs much more than the same reducing-balance rate.

Take ₹5 lakh over 3 years. At 10% flat, the interest is 5,00,000 × 10 × 3 ÷ 100 = ₹1,50,000, so the EMI is ₹6,50,000 ÷ 36 = ₹18,055.56. At 10% on a reducing balance, the EMI is ₹16,133.59 and the total interest is ₹80,809, which is ₹69,191 less. Before you accept a quote, ask whether the rate is flat or reducing, then check the EMI with the EMI calculator or compare two offers with the loan comparison calculator.

Simple interest and bank deposits

Bank FDs usually compound quarterly, which is why this calculator compares simple interest with quarterly compounding rather than monthly. If interest is paid out to you rather than added to the deposit, it cannot compound, so simple interest is the closer guide to what you receive. The exact method depends on the bank and the deposit, so check its terms. To see how a lump sum or a monthly RD grows when interest stays in, use the compound interest calculator.

Common mistakes with simple interest

• Entering a monthly rate as a yearly one. 1.5% a month is 18% a year, which on ₹1 lakh is ₹18,000 a year, not ₹1,500.
• Mixing up months and years. 18 months is 1.5 years. Choose "Months" under "Time in" and the calculator converts it for you.
• Comparing a flat rate with a reducing-balance rate. The same number means a very different cost, as the loan example above shows.

Interest on late payments

When interest runs for a number of days, such as on a payment made after its due date, the per-day figure gives a quick estimate. For GST paid after the due date, the GST interest calculator works it out from the due date and the date you paid. And to see what rising prices do to money that earns little or no interest, try the inflation calculator.

This calculator gives estimates for education and planning. It is not financial advice, and your lender's figures may differ. See how we calculate.