Calculate simple interest (SI = P × R × T / 100) for any principal, rate, and time. Shows step-by-step substitution into the formula, year-by-year interest accrual, and a comparison vs compound interest on the same inputs.
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Simple Interest Calculator
Calculate simple interest (SI = P × R × T / 100) for any principal, rate, and time. Shows step-by-step substitution into the formula, year-by-year interest accrual, and a comparison vs compound interest on the same inputs.
Loan / Deposit Details
The initial amount lent or deposited
Annual rate of interest in percent
Time period in years (use decimals for partial years)
Simple Interest
Simple interest: ₹40,000Final amount: ₹1,40,000 after 5 years
Principal
₹1.0 L
Rate
8.00%
Time
5 years
Simple Interest
₹40,000
Formula & Substitution
SI = P × R × T / 100SI = 1,00,000 × 8 × 5 / 100SI = 40,00,000 / 100SI = ₹40,000Step-by-step substitution into the NCERT Class 8 formula — copy this directly into your maths notebook.
Year-by-Year Breakdown
| Year | Interest (this year) | Cumulative interest | Balance |
|---|---|---|---|
| 1 | ₹8,000 | ₹8,000 | ₹1,08,000 |
| 2 | ₹8,000 | ₹16,000 | ₹1,16,000 |
| 3 | ₹8,000 | ₹24,000 | ₹1,24,000 |
| 4 | ₹8,000 | ₹32,000 | ₹1,32,000 |
| 5 | ₹8,000 | ₹40,000 | ₹1,40,000 |
Notice each year's interest is exactly the same — that is the defining property of simple interest.
Simple vs Compound Interest
If this were compounded annually instead of simple, the interest would be ₹46,933 (₹6,933 more, or 17.33% premium). Compounding gives “interest on interest” — for short periods this differential is small, but for 10+ years it's significant.
Simple Interest
₹40,000
Compound Interest (annual)
₹46,933
Want the full compound projection with quarterly / monthly compounding? Open the Compound Interest Calculator →
Simple vs Compound — balance over time
How It Works
Simple interest is the interest computed only on the original principal — it never earns more interest. In India this is the formula every school student learns in Class 7 or 8, and it is the standard for informal hand-loans between friends and family.
The formula
SI = P × R × T / 100 and Final Amount = P + SI
Where P is the principal (initial amount), R is the annual rate of interest in percent, and T is the time period in years. The interest earned each year is constant — at 8% on ₹1,00,000, you get exactly ₹8,000 every year, no matter how long the deposit runs.
Where you will see simple interest
Informal hand-loans (uncle lending you ₹50,000 at 12% for a year). Money-back life insurance bonus illustrations. Certain co-operative bank short-term FDs. Class 7–10 maths homework. And, very rarely, corporate inter-company loans where the contract specifies simple interest.
Why most bank products use compound interest instead
Banks compound your interest — typically every quarter — so the interest itself starts earning interest. Over 5 years at 8% on ₹1,00,000, simple interest gives you ₹40,000 but annual compounding gives you ₹46,933. That ₹6,933 premium is the “magic of compounding,” and it gets larger the longer you stay invested. For bank FDs use the FD Calculator; for general compound-growth scenarios use the Compound Interest Calculator.
Frequently Asked Questions
Simple Interest = (Principal × Rate × Time) / 100, written as SI = P × R × T / 100. P is the principal in rupees, R is the annual rate of interest in percent (use 8, not 0.08), and T is the time period in years. The final amount A = P + SI. This is the standard NCERT Class 8 formula and the same one used for hand-loans and informal lending in India.
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