How do I calculate simple interest and compound interest together?

Enter the same principal, rate, and time period once in the calculator above. It applies the simple interest formula (P x R x T / 100) and the compound interest formula (P x (1 + r/n)^(n x t)) to the identical inputs, so you see both results and the exact rupee difference side by side.

Which is better, simple interest or compound interest?

For an investment or deposit, compound interest earns you more money at the same stated rate, because interest earns further interest. For a loan, compound (or reducing-balance) interest generally costs more than simple interest over the same tenure, so which one is "better" depends on whether you are earning or paying.

How do I convert a simple interest rate to an equivalent compound interest rate?

Use the rate converter in the "Converting Between Simple and Compound Interest Rates" section below. It solves the equation (1 + compound rate)^years = 1 + (simple rate x years / 100) for the compound rate, so both methods produce the same total return over the same period.

Does compound interest always earn more than simple interest at the same rate?

Yes, for any tenure longer than one compounding period, compound interest produces a higher total than simple interest at the identical rate and principal. Over exactly one year with annual compounding, the two methods give the same result, since there is no prior interest yet to compound.

How much more does compound interest earn than simple interest over 10 years?

It depends on the rate and compounding frequency, but the gap is substantial at typical Indian savings rates. At 8% per annum with annual compounding, Rs 1,00,000 earns Rs 80,000 as simple interest over 10 years versus about Rs 1,15,893 as compound interest, a difference of roughly Rs 35,893.

Do home loans in India use simple interest or compound interest?

Most home loans use a reducing-balance method, which behaves like interest compounded monthly on the outstanding principal after each EMI. A small number of short-term or flat-rate loan products quote simple interest instead, which usually costs more than the quoted rate suggests once converted to an effective annual rate.

What is the formula for simple interest?

Simple Interest (I) equals Principal x Rate x Time / 100, where the rate is the annual percentage and time is in years. Total Amount equals Principal plus Simple Interest.

Can I calculate simple interest and compound interest in Excel?

Yes. Simple interest is =Principal*Rate*Years/100, and compound interest is =Principal*(1+Rate/N)^(N*Years), where N is the compounding frequency per year. Both formulas are covered with worked examples in the "Simple and Compound Interest Formulas in Excel" section below.

Which Indian investments use simple interest and which use compound interest?

Savings accounts typically calculate interest daily on a simple basis and credit it quarterly, while fixed deposits, PPF, EPF, and recurring deposits compound at yearly, half-yearly, or quarterly frequency. Short-term NBFC loans, some car loans, and the education loan moratorium period commonly use simple interest instead.

Does compounding frequency change how much compound interest earns?

Yes. At the same stated annual rate, monthly compounding produces a higher maturity value than yearly compounding, because interest gets added to the principal sooner and starts earning its own interest sooner. The difference is small over a few years and becomes meaningful over a decade or more, and the calculator above lets you switch frequency to see the exact effect on your own numbers.

Is this simple and compound interest calculator free to use?

Yes, the calculator is free to use with no limit on how many times you run it. An optional free account lets you save your calculation and return to it later, and the site carries advertising to support that free access.

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Simple and Compound Interest Calculator: Compare Instantly

What Is the Difference Between Simple and Compound Interest?

Simple interest is calculated only on the original principal for every period. Compound interest is calculated on the principal plus all interest already earned, so the gap between the two widens every additional year.

At the same rate and principal, the two methods give an identical result for exactly one year of annual compounding. From the second year onward, compound interest pulls ahead, since it starts earning interest on interest that simple interest never accounts for.

This calculator runs both formulas on the identical principal, rate, and time period you enter above, so you can see the exact rupee gap rather than estimating it.

Simple Interest Formula

Simple Interest (I) = P x R x T / 100
Total Amount (A) = P + I

P is the principal, R is the annual rate as a percentage, and T is the time in years. Worked example: ₹1.00 L at 8.0% for 10 years earns simple interest of ₹80,000, for a total amount of ₹1,80,000.

Compound Interest Formula

A = P x (1 + r/n)^(n x t)
Compound Interest = A - P

r is the annual rate as a decimal, n is the number of times interest compounds per year, and t is the time in years. The same ₹1.00 L at 8.0% for 10 years, compounded yearly, grows to ₹2,15,892, a compound interest of ₹1,15,892.

That is ₹35,892 more than the ₹80,000 the same money would earn as simple interest over the same period.

Converting Between Simple and Compound Interest Rates

A simple rate and a compound rate are not directly comparable numbers, because they measure growth differently over the same period. The converter below solves for the annually-compounded rate that produces the same total return as a given simple rate, or the reverse, over the same number of years.

Simple Rate % p.a.

Time in Years

Equivalent compound rate (annual)8.45%

Compound rate = [(1 + Simple rate x Years / 100)^(1/Years) - 1] x 100
Simple rate = [(1 + Compound rate/100)^Years - 1] x 100 / Years

Worked example: a 10% simple rate over 5 years is equivalent to an annually-compounded rate of about 8.45%, since compounding needs a lower stated rate to reach the same total. Run the same 10% as a compound rate over 5 years instead, and it converts back to an equivalent simple rate of about 12.21%.

Which Grows Faster: Simple or Compound Interest?

Compound interest always grows faster than simple interest at the same rate, and the advantage compounds itself: the longer the tenure, the wider the gap becomes in both rupee and percentage terms.

Rs 1,00,000 at 10% per annum, simple interest total vs annually-compounded total, by tenure
Tenure	Simple Interest Total	Compound Interest Total	Gap
5 years	₹1,50,000	₹1,61,051	₹11,051
10 years	₹2,00,000	₹2,59,374	₹59,374
20 years	₹3,00,000	₹6,72,750	₹3,72,750
30 years	₹4,00,000	₹17,44,940	₹13,44,940

The gap at 5 years is a fraction of what it becomes by 30 years, purely from interest earning further interest each additional year. Adjust the tenure slider in the calculator above to see this same widening effect on your own numbers.

How Compounding Frequency Affects the Comparison

A higher compounding frequency at the same stated annual rate produces a larger compound interest total, since interest gets added to the principal sooner and starts earning its own interest sooner. Simple interest does not change at all when you switch frequency, because it never compounds in the first place.

Rs 1,00,000 at 8% per annum for 10 years: compound interest total by compounding frequency, against a fixed simple interest total
Frequency	Compound Interest Total
Yearly	₹2,15,892
Half-Yearly	₹2,19,112
Quarterly	₹2,20,804
Monthly	₹2,21,964
Simple interest (any frequency)	₹1,80,000

Simple vs Compound Interest on Loans and EMIs

Most home loans, car loans, and personal loans in India use a reducing-balance method, which recalculates interest on the outstanding principal after every EMI payment. This behaves like interest compounded monthly, not like simple interest.

Some short-term NBFC loans, flat-rate car loans, and the moratorium period on education loans instead quote a simple or flat interest rate. A flat-rate loan usually costs more than its quoted rate suggests once converted to an effective annual rate, since simple interest is charged on the original amount even as the balance is repaid down.

Run an actual home loan or personal loan through the EMI Calculator for the real reducing-balance schedule, rather than relying on either formula on this page for a loan.

FD Calculator

Run a real fixed deposit through quarterly compounding, TDS, and senior citizen rates.

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Where Simple and Compound Interest Are Used in India

Products that compound

Fixed deposits, recurring deposits, PPF, EPF, and most bank savings accounts compound at yearly, half-yearly, quarterly, or daily-then-credited frequency. For a savings account with the exact daily-balance method, use the Savings Account Interest Calculator.

Products that use simple interest

Short-term personal loans, flat-rate car loans, the education loan moratorium period, and many microfinance and peer-to-peer lending products quote simple interest. It stays predictable and easy to verify by hand, which is why lenders on short, fixed-term products often prefer it.

Simple and Compound Interest Formulas in Excel

Both formulas translate directly into a spreadsheet, with cells for principal, rate, years, and compounding frequency.

Excel formulas, where P, R, N, and T reference the cells holding principal, annual rate, compounding frequency, and years
Result	Excel Formula
Simple interest	=PRT/100
Simple interest total amount	=P+(PRT/100)
Compound interest total amount	=P(1+R/N)^(NT)
Compound interest	=P(1+R/N)^(NT)-P

How to Use This Calculator

The calculator needs four inputs:

Principal Amount: enter the amount you plan to invest or borrow, using the slider or by clicking the value to type an exact figure.
Rate of Interest: enter the annual rate that applies to both the simple and compound interest calculations.
Time Period: set the number of years, or pick one of the preset year buttons.
Compounding Frequency: choose yearly, half-yearly, quarterly, or monthly for the compound interest side only, since simple interest never compounds.

Both totals, the interest earned under each method, and the extra amount from compounding update instantly. Expand Year-by-Year Comparison to see the gap widen year by year in both a chart and a table.

Limitations of This Calculator

Uses one rate for both methods.

Real products rarely quote the same headline rate for a simple-interest loan and a compounding deposit. Use this rate as a like-for-like comparison, not as two real product quotes.

Assumes a single, one-time principal.

It does not model recurring monthly contributions. For a monthly SIP, use the SIP Calculator or Step-Up SIP Calculator instead.

Assumes a constant rate for the entire tenure.

Real rates on FDs, PPF, EPF, and loans can change between renewal or reset cycles.

Does not calculate tax or TDS.

Interest income is taxable at your slab rate, with TDS deducted once thresholds under Section 194A are crossed. Use the Interest Calculator or FD Calculator for a version with TDS built in.

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Frequently Asked Questions

Simple interest is calculated only on the original principal for every period, so the interest amount stays the same each year. Compound interest is calculated on the principal plus all interest already earned, so it grows faster with every additional year the money stays invested.

Disclaimer: All calculations on this page are indicative only, based on the principal, rate, tenure, and compounding frequency you enter. This calculator applies one rate to both methods for comparison purposes and does not reflect the actual rates any specific bank or lender quotes, does not account for tax or TDS, and does not model loan reducing-balance schedules. It is for educational and planning purposes only and does not constitute financial advice. Consult a SEBI-registered investment adviser or a chartered accountant before making financial decisions.