Calculate simple interest and the maturity amount from your principal, annual rate and time — using SI = P × R × T.
How simple interest works
Simple interest is charged on the original principal only — it never earns interest on the interest already accrued. That gives a clean, straight-line formula:
Simple Interest = P × R × T
where P is the principal, R the annual rate (as a decimal, so 8% = 0.08) and T the time in years. The maturity amount is simply P + SI, or P × (1 + R × T).
Worked example: ₹1,00,000 at 8% for 5 years
₹1,00,000 × 0.08 × 5 = ₹40,000 of interest, for a maturity of ₹1,40,000. Each year adds a flat ₹8,000 — no acceleration. The same deposit under annual compounding would earn ₹46,933, about ₹6,933 more, because compounding pays interest on interest.
Simple interest vs compound interest
The difference is small over a year or two but widens sharply over time. Simple interest grows linearly; compound interest grows exponentially. For borrowing, simple interest is cheaper for you; for saving, compound interest is what you want. Most modern savings products — FDs, PPF, mutual funds — compound, while some short-term loans and informal lending use simple interest. To see the compounding effect for yourself, switch to our compound interest calculator, and for annualised investment growth use the CAGR calculator.
Where you'll meet simple interest
Simple interest commonly appears in flat-rate car and personal loans, periodic-payout fixed deposits that don't reinvest interest, bond coupons, and informal loans. Whenever a lender quotes a "flat rate," they usually mean simple interest on the full principal for the whole tenure — which can work out far more expensive than a reducing-balance EMI at the same headline rate. Compare an actual loan with our EMI calculator.
Frequently Asked Questions
How is simple interest calculated?
Simple interest is charged only on the original principal: SI = P × R × T, where P is the principal, R the annual rate (as a decimal) and T the time in years. So ₹1,00,000 at 8% for 5 years earns ₹1,00,000 × 0.08 × 5 = ₹40,000. The interest never earns interest, which is what separates it from compound interest.
What is the difference between simple and compound interest?
Simple interest is computed only on the principal, year after year, so it grows in a straight line. Compound interest is computed on the principal plus all previously earned interest, so it accelerates. On ₹1,00,000 at 8% for 5 years, simple interest gives ₹40,000 while annual compounding gives ₹46,933 — about ₹6,933 more. See our
compound interest calculator.
Where is simple interest actually used?
Simple interest shows up in many short-term car loans and some personal loans, in certain fixed deposits that pay out interest periodically (no compounding), in many informal loans, and in some bond coupon calculations. Most savings and long-term loans, by contrast, use compound interest.
How do I calculate the maturity amount with simple interest?
Maturity = Principal + Simple Interest = P × (1 + R × T). For ₹1,00,000 at 8% for 5 years that is ₹1,00,000 × (1 + 0.40) = ₹1,40,000. The calculator shows both the interest and this total.
Does a higher rate or longer time matter more?
In the SI formula both rate and time multiply the principal directly, so doubling either doubles the interest. The bigger long-run difference comes from compounding: over many years, even a slightly lower compounded rate can beat a higher simple rate. For multi-year horizons, always check the compound figure too.
Is interest income from simple-interest deposits taxable?
Yes. Interest income is added to your total income and taxed at your slab rate, whether it is simple or compound. TDS rules apply once bank interest crosses ₹50,000 a year (₹1,00,000 for senior citizens, FY 2025-26 limits). Estimate the tax with our
income tax calculator.
Estimates are for information and education only — not financial, tax or investment advice. Verify current rates and rules with official sources.