Simple Interest
Flat interest on the original principal, with year-wise growth.
Year-by-year growth table
| Year | Value | Interest earned |
|---|---|---|
| 1 | ₹1,08,000 | ₹8,000 |
| 2 | ₹1,16,000 | ₹16,000 |
| 3 | ₹1,24,000 | ₹24,000 |
| 4 | ₹1,32,000 | ₹32,000 |
| 5 | ₹1,40,000 | ₹40,000 |
| 6 | ₹1,48,000 | ₹48,000 |
| 7 | ₹1,56,000 | ₹56,000 |
| 8 | ₹1,64,000 | ₹64,000 |
| 9 | ₹1,72,000 | ₹72,000 |
| 10 | ₹1,80,000 | ₹80,000 |
Simple interest is interest charged only on the original principal, never on the interest already accrued. The formula is SI = P × R × T ÷ 100, so the amount added each year is identical and the balance grows in a straight line. Enter your principal, rate and period above to see the interest and final value instantly.
This calculator is useful in two situations: valuing something that genuinely pays flat interest, and checking a 'flat rate' loan quote. In India, flat-rate quotes on car, gold, two-wheeler and some personal loans look cheap next to reducing-balance rates — and this page shows you why that comparison is misleading.
How is simple interest calculated?
Simple interest is SI = (P × R × T) ÷ 100, and the maturity value is A = P + SI, where P is the principal, R the annual rate in percent and T the time in years. Because the base never changes, each year adds exactly the same rupee amount — which is why the year-by-year table above rises in equal steps rather than curving.
For example, ₹1,00,000 at 8% for 10 years earns (1,00,000 × 8 × 10) ÷ 100 = ₹80,000 in interest, for a total of ₹1,80,000. The same deposit under annual compounding would be worth ₹2,15,892, so compounding is ₹35,892 better over the identical period. Every rupee of that difference is interest that simple interest never lets you earn on.
How to use this calculator
- Enter the principal — the loan amount, deposit or advance the flat rate applies to.
- Enter the flat annual rate exactly as it was quoted to you.
- Set the time period in years; use decimals for part years, such as 1.5 for eighteen months.
- Read the total interest and total value, and use the doughnut to see how much of the final amount is interest.
- If you are checking a loan quote, take the total value, divide by the number of months to get the EMI, then compare that EMI against a reducing-balance offer for the same tenure.
Where simple interest actually shows up in India
Very few Indian savings products pay simple interest — bank FDs, RDs, PPF and NSC all compound. Where you do meet it is on the borrowing side and in short-term credit: many gold loans and bullet-repayment loans accrue simple interest until closure, dealer-financed car and two-wheeler loans are commonly quoted as flat rates, some consumer-durable and 'no-cost EMI' schemes are structured this way, and statutory interest such as the 1% a month levied under Sections 234A/B/C of the Income Tax Act is simple interest. Post-office schemes like MIS and SCSS also pay out interest periodically without compounding it, which is effectively simple interest unless you reinvest the payouts yourself.
The trap is the flat-versus-reducing gap. A ₹5,00,000 car loan quoted at 8% flat for 5 years charges 8% on the full ₹5,00,000 every year — ₹2,00,000 of interest in total, a ₹7,00,000 repayment and an EMI of ₹11,667. But you are not holding ₹5,00,000 for five years; you repay it steadily, so the average outstanding is roughly half that. Run that same EMI through a reducing-balance calculation and the true annual rate is about 14.1%, not 8%. A rough rule of thumb is that a flat rate is close to double the equivalent reducing rate for a typical multi-year loan, so never compare a flat quote against a bank's reducing-balance quote at face value — convert first, or compare the EMIs directly.
Frequently asked questions
What is the simple interest formula?
SI = (P × R × T) ÷ 100, where P is the principal, R the annual rate in percent and T the time in years. The total amount repayable or receivable is A = P + SI. Because interest is always computed on the original principal, the yearly interest amount never changes.
How is simple interest different from compound interest?
Simple interest is calculated only on the principal, so the balance grows linearly, while compound interest adds each period's interest back to the base so growth accelerates. On ₹1,00,000 at 8% for 10 years, simple interest pays ₹80,000 and annual compounding pays ₹1,15,892.
What does a 'flat rate' loan mean?
A flat rate charges interest on the entire original loan amount for the whole tenure, ignoring the fact that you repay principal every month. It is the same thing as simple interest applied to a loan, and it always makes a loan look cheaper than it really is.
How do I convert a flat rate into a reducing rate?
Compute the total repayment as principal plus flat interest, divide by the number of months to get the EMI, then solve for the reducing rate that produces that EMI. A ₹5,00,000 loan at 8% flat over 5 years means an EMI of ₹11,667, which is really about 14.1% on a reducing balance — roughly double the quoted figure.
Which Indian loans use simple or flat interest?
Gold loans and bullet-repayment loans often accrue simple interest until closure, and dealer-financed car, two-wheeler and consumer-durable loans are frequently quoted at flat rates. Home loans and most bank personal loans use reducing balance, which is why their headline rates look higher than a flat quote for the same cost.
Do any savings products in India pay simple interest?
Almost none in the strict sense — FDs and RDs compound quarterly, PPF and NSC annually. However, payout schemes such as post-office MIS, SCSS and non-cumulative FDs credit interest to you periodically without reinvesting it, so unless you reinvest the payouts yourself the effect is the same as simple interest.
Related tools
SIP Calculator
Future value of monthly mutual-fund SIPs, with annual step-up.
Lumpsum Calculator
One-time investment growth and maturity value over the years.
SWP Calculator
Monthly withdrawals from a corpus and how long it lasts.
FD Calculator
Fixed deposit maturity value and interest with bank-style compounding.
RD Calculator
Recurring deposit maturity value and interest with quarterly compounding.
PPF Calculator
Public Provident Fund maturity value, interest and year-wise growth.
Salary Slip Generator
Create a professional payslip and download a white-label PDF — free.
Disclaimer: results are estimates based on the inputs and published rules/rates, for information only — not investment, tax or legal advice. Verify important decisions with a qualified professional. See our full disclaimer.