Simple Interest Calculator
Calculate simple interest on a principal amount for any tenure.
Results
Principal
₹1.00 L
Simple interest
₹24.0K
Total amount
₹1.24 L
Effective return over 3 years
24.00%
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Simple interest vs compound interest — what's the difference?
Simple interest (SI) is calculated only on the original principal, not on accumulated interest. The formula is SI = P × R × T / 100, where P is the principal, R is the annual rate, and T is the time in years. For example, ₹1 lakh at 8% for 3 years earns ₹24,000 in simple interest.
In India, simple interest is used in most personal loans, car loans, and short-term borrowings where interest is calculated on the reducing principal. It's also used in some government schemes and money market instruments. Most savings instruments like FDs and RDs use compound interest, which yields more over time.
Simple interest is easier to compute and predict, making it useful for understanding the bare cost of borrowing or return from lending. For longer investment horizons, always prefer compound interest instruments — the difference becomes substantial. ₹1 lakh at 8% simple interest for 10 years gives ₹80,000 return, while compound interest at the same rate gives approximately ₹1.16 lakh.