Simple Interest Calculator
Calculate simple interest, where growth is linear — interest is only ever computed on the original principal.
Maturity value
₹1,40,000
Interest earned: ₹40,000
Simple interest tips
- Compare against the Compounding Calculator at the same numbers to see the real value of compound interest.
- Some non-cumulative FDs use simple-interest-style periodic payouts — check your specific product's terms.
- As a borrower, simple interest usually costs less over time than compound interest at the same rate.
How it's calculated
Simple interest is calculated only on the original principal, for every year of the tenure — it never earns interest on interest already added, unlike compound interest. That makes it grow linearly with time, not exponentially.
Simple interest = Principal × rate × tenure ÷ 100
Maturity value = Principal + simple interest
Example
₹1,00,000 at 8% for 5 years earns exactly ₹40,000 in interest every time — a maturity value of ₹1,40,000 — since simple interest never compounds on itself.
About simple interest
Simple interest is the more basic of the two interest models — every year earns the exact same rupee amount of interest, calculated only on the original principal. It's the foundation most people learn before compound interest, and it's still used by some real financial products.
How it works
Multiply the principal by the annual rate and the tenure in years, then divide by 100. Unlike a cumulative FD or SIP, none of the interest earned along the way is reinvested — it either accrues separately or is paid out, but it never itself earns further interest.
How to use it
- Set your principal, annual rate and tenure.
- Compare the result against our Compounding Calculator at the same numbers to see exactly how much compounding is worth over your tenure.
Strategies
If a product offers you a choice between simple and compound interest at the same rate, compound interest is always better for you as the saver (and worse for you as the borrower) — the difference grows larger the longer the tenure. Always check which convention a product actually uses rather than assuming.
Important caveats
- This is a generic maths tool — it doesn't model any specific product's rules, taxes, fees, or payout schedule.
- Interest income is generally taxable at your income slab rate — this calculator shows pre-tax growth.
Why it works
Because the interest amount is fixed every year (principal × rate never changes), total interest is just that fixed yearly amount multiplied by the number of years — a straight line, not a curve, when plotted over time.
Benefits
- Simple to understand and predict — the interest amount never changes year to year.
- Useful as a baseline to compare against compound-interest products, to see exactly what compounding is worth.
Frequently asked questions
How is simple interest different from compound interest?
Simple interest is calculated only on the original principal, every period, for the whole tenure. Compound interest adds each period's interest back into the principal, so future interest is earned on a growing balance — that's why compound interest always grows faster than simple interest at the same rate and tenure (beyond the first period).
Where is simple interest actually used?
Some short-term loans, non-cumulative FDs (which pay interest out periodically instead of reinvesting it), and certain fixed-tenure certificates use simple interest. It's also the standard way many personal loan and short-term lending products calculate cost.
What is the formula used here?
Simple interest = P × r × t ÷ 100, where P is principal, r is the annual rate (%), and t is the tenure in years — interest grows linearly with time, not exponentially like compound interest.
Learn more from official sources
- Reserve Bank of India (RBI) — regulator for Indian banks and deposit products.
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