Quick answer
Simple interest is calculated only on the original principal: SI = (P × R × T) ÷ 100. ₹1,00,000 at 8% for 5 years earns ₹40,000, so the total is ₹1,40,000. Compound interest on the same amount would earn ₹46,933.
Key takeaways
- Used for short-term loans, some car loans, and informal lending.
- Interest is the same every year.
- For periods under a year, use T in years (e.g. 6 months = 0.5).
Simple interest formula
SI = (P × R × T) ÷ 100; Amount = P + SI- P = principal
- R = rate per year (%)
- T = time in years
Frequently asked questions
How do I calculate simple interest for months?
Convert months to years: T = months ÷ 12. For 9 months at 10% on ₹50,000: SI = 50,000 × 10 × 0.75 ÷ 100 = ₹3,750.
Where is simple interest used in India?
In some personal and gold loans, short-term FDs under 6 months, and many informal loans. Most bank deposits and home loans use compounding or reducing-balance methods.
Sources & methodology
Formulas follow the standard methods used by Indian banks, fund houses and government schemes. Rates and tax rules were checked against official sources on 1 October 2026. Read our methodology.
This calculator gives an estimate for planning purposes. Actual returns, tax and eligibility depend on your situation and on product terms. It is not financial advice.