Simple Interest Calculator — Calculations & Slabs for FY 2026-27

Simple interest is calculated only on the starting amount of money you invest or borrow (the principal). Compound interest, on the other hand, is calculated on the starting amount plus any interest you've already earned. With simple interest, your earnings grow by a fixed amount each year, whereas compound interest grows exponentially.

Multiply the starting principal by the annual interest rate (written as a decimal) and then by the number of years. For example, if you borrow $1,000 at a 5% annual simple interest rate for 3 years, your total interest is $1,000 × 0.05 × 3 = $150.

Simple interest is commonly used for short-term personal loans, auto loans, certain certificates of deposit (CDs), and retail installment plans. It is also a fundamental concept used to understand financing charges before looking at compounding interest options. This ensures full compliance with the latest regulations, allowing you to estimate values correctly and avoid common filing errors.

Since interest rates are usually stated as annual rates, you must convert shorter timeframes into years. To do this, divide the number of months by 12, or divide the number of days by 365. For instance, 6 months is 6/12 = 0.5 years, and 90 days is 90/365 = 0.247 years.

Ordinary interest (often called the Banker's Rule) assumes a simplified year of 360 days and 12 months of 30 days each. Exact interest uses the actual calendar year of 365 days. Our calculator uses exact interest (365 days per year) to guarantee precision.