Simple Interest Calculator
Flat, non-compounding interest — and what you give up by not compounding.
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₹1.40 L
₹1.00 L grows by a flat ₹40,000 over 5 years — a 40.0% total return, no compounding applied
Year 1
₹1.08L
Year 3
₹1.24L
Year 4
₹1.32L
Year 5
₹1.40L
SI = (P × R × T) ÷ 100 — interest is charged only on the principal, nothing compounds. Estimate of a level, non-compounding return, before any tax.
Simple interest vs compound interest
What ₹1,00,000 at 8.0% over 5 years becomes under each method. Compounding reinvests every year's interest, so it earns interest on interest — and pulls ahead a little more every year.
Simple interest
₹1.40 L
₹40,000 interest · linear
Compound interest
₹1.47 L
₹46,933 interest · compounded yearly
Power of compounding
+₹6,933
17% more interest, same rate
Compounding the same ₹1,00,000 at the same 8.0% would hand you ₹6,933 more over 5 years — that's the wealth simple interest leaves on the table.
Simple interest earns
₹40,000
flat, every year
Compound interest earns
₹46,933
growing every year
Missed opportunity
−₹6,933
interest you never earn
Tenure comparison — the gap widens
Same ₹1.00 L at 8.0%: simple vs compound at different horizons.
| Tenure | Simple | Compound | CI advantage |
|---|---|---|---|
| 5y | ₹1.40 L | ₹1.47 L | +₹6,933 |
| 10y | ₹1.80 L | ₹2.16 L | +₹35,892 |
| 15y | ₹2.20 L | ₹3.17 L | +₹97,217 |
| 20y | ₹2.60 L | ₹4.66 L | +₹2.06 L |
The longer the money stays invested, the bigger the cost of not compounding. Highlighted row matches your tenure.
Year-wise breakdown
Under simple interest you earn the same ₹8,000 every year.
| Year | Opening | Interest | Closing |
|---|---|---|---|
| Year 1 | ₹1.00 L | ₹8,000 | ₹1.08 L |
| Year 2 | ₹1.08 L | ₹8,000 | ₹1.16 L |
| Year 3 | ₹1.16 L | ₹8,000 | ₹1.24 L |
| Year 4 | ₹1.24 L | ₹8,000 | ₹1.32 L |
| Year 5 | ₹1.32 L | ₹8,000 | ₹1.40 L |
Month-by-month growth
Closing balance and cumulative return for each of the 60 months. Under simple interest the monthly interest is identical throughout.
| Month | Balance | Interest | Total return |
|---|---|---|---|
| Year 1 | ₹1.08 L | ₹667/mo | 8.0% |
| Year 2 | ₹1.16 L | ₹667/mo | 16.0% |
| Year 3 | ₹1.24 L | ₹667/mo | 24.0% |
| Year 4 | ₹1.32 L | ₹667/mo | 32.0% |
| Year 5 | ₹1.40 L | ₹667/mo | 40.0% |
Principal needed to reach a target final amount at 8.0% simple interest over 5 years.
| Target final amount | Invest today | Interest earned |
|---|---|---|
| ₹5.00 L | ₹3.57 L | ₹1.43 L |
| ₹10.00 L | ₹7.14 L | ₹2.86 L |
| ₹25.00 L | ₹17.86 L | ₹7.14 L |
| ₹50.00 L | ₹35.71 L | ₹14.29 L |
Reverse of A = P(1 + R·T/100): we solve for the principal P that grows to each target.
- 29% of the final amount is interest you earned.
- Flat ₹8,000 every year — nothing is reinvested.
- Compounding would add ₹6,933 on top.
Where does your money come from?
29% of the final amount is interest you earned — 71% is the money you put in.
Good for
- Personal loans and many car loans, where interest is charged flat on the original amount
- Short-term loans and bridge finance of a year or two
- Consumer / instalment finance with a fixed flat rate
- Quick back-of-envelope estimates where exact compounding doesn't matter
Not ideal for
- Long-term wealth building — compounding does the heavy lifting there
- Savings, FDs and most investments, which compound by default
- Multi-decade goals like retirement, where the compounding gap is huge
- Comparing against compounding products on the headline rate alone
How simple interest works
Interest is charged only on the original principal of ₹1,00,000. The principal never changes, so you earn the same ₹8,000 every single year. After 5 years that adds up to a flat ₹40,000, and you get back ₹1.40 L. Because nothing is ever reinvested, the total grows in a perfectly straight line — easy to reason about, but slower than compounding.
Key highlights
- Principal invested: ₹1,00,000
- Simple interest: ₹40,000 (flat ₹8,000/yr)
- Final amount in 5 years: ₹1.40 L
- Total SI return: 40.0% (effective 6.96% p.a.)
- Missed by not compounding: ₹6,933
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Your plan: ₹1.00 L at 8.0% for 5 years → about ₹1.40 L.
Continue planning
See what the same money does when it compounds — an FD, a lumpsum or a loan EMI.
Figures are estimates of a level, non-compounding return before any tax. Products differ — always confirm whether a loan or deposit uses simple or compound interest before relying on any estimate.
How simple interest is calculated
SI = (P × R × T) ÷ 100 · A = P + SI
- SI
- simple interest earned (flat, never compounds)
- A
- final amount returned = principal + interest
- P
- principal you invest
- R
- annual interest rate, in percent
- T
- time period, in years
Worked example
With your inputs — ₹1,00,000 at 8.0% for 5 years: the interest is SI = (₹1.00 L × 8.0 × 5) ÷ 100 = ₹40,000, a flat ₹8,000 every year. Add that to the principal and the final amount is A = ₹1.00 L + ₹40,000 = ₹1.40 L. Interest is charged only on the principal — nothing compounds — so this is an estimate of a level, non-compounding return, before any tax.
Most asked simple-interest questions
Simple interest is flat interest charged only on the original principal. It does not compound — the principal never changes, so the interest earned each year is identical for the whole term, and the total grows in a straight line.
Simple interest = (P × R × T) ÷ 100, where P is the principal, R is the annual rate in percent and T is the time in years. The final amount you get back is A = P + simple interest, i.e. P + (P × R × T) ÷ 100.
Simple interest is calculated only on the principal, so it grows in a straight line. Compound interest is calculated on the principal plus accumulated interest, so each year's growth itself earns growth. For the same rate and term, compound interest always returns more — this page shows you exactly how much more, the money simple interest leaves on the table.
It is the total interest expressed as a percentage of the principal over the whole term — R × T. A 10% rate over 5 years is a 50% total simple-interest return. Because it never compounds, the equivalent annualised (effective) yield is lower: a 50% total over 5 years is only about an 8.4% effective compound-equivalent rate.
It's common in short-term and consumer loans, some car and personal loans, and certain government deposit schemes. Most savings products and long-term loans use compound interest instead, so check the terms before assuming.
It depends on which side you're on. As a borrower, simple interest is usually cheaper because the interest never builds on itself. As a saver or investor, compound interest is far better — it's what builds long-term wealth. For multi-year goals, always look for compounding.
The complete guide to simple interest
What simple interest is
Simple interest charges a flat rate on the original principal only. Because the principal never changes, the interest earned is the same every year and the total grows in a straight line — SI = (P × R × T) ÷ 100 added on top of what you started with. There is no interest-on-interest, which makes it easy to reason about but slower to grow than compounding.
How it's calculated
The formula is SI = (P × R × T) ÷ 100 and A = P + SI, with R the annual rate in percent and T the time in years. A ₹1,00,000 principal at 8% for 5 years earns a flat ₹8,000 every year, for a total ₹40,000 of interest and ₹1,40,000 back. The numbers stay constant for the whole term.
Simple vs compound — what you give up
This is the question that really matters. Compound interest reinvests each year's interest, so it earns interest on interest and pulls ahead of simple interest a little more every year. Over a single year the two match; over decades the gap becomes enormous. The comparison above shows exactly how much more the same money at the same rate would make if it compounded — the wealth simple interest leaves on the table.
Why the effective yield is lower
A simple-interest rate looks like its headline number, but the annualised (effective) return you actually earn is lower over multi-year terms, because the early interest never gets reinvested. A 10% simple rate over 5 years is a 50% total return — but only about an 8.4% compound-equivalent yield. When comparing a simple-interest product against a compounding one, use the effective yield, not the headline rate.
Where simple interest shows up
Simple interest is common in short-term and consumer loans, some car and personal loans, certain bonds and a few government deposit schemes. Most savings products and long-term loans compound instead. Because the method changes the cost or return materially over time, always confirm which one a product uses before relying on any estimate — treat the figures here as a planning guide, not a quote.
Borrowing vs saving
Which method helps you depends on which side of the loan you're on. As a borrower, simple interest is usually the cheaper deal because the interest never builds on itself. As a saver or investor, you want the opposite — compound interest is what turns modest, regular money into real long-term wealth. For any multi-year savings goal, prefer products that compound.