Simple Interest Formula — SI = PRT/100 Explained

Simple Interest Defined

Simple interest is calculated only on the original principal — accumulated interest does not earn further interest. The formula used in Indian school and banking exams:

SI = (P × R × T) / 100

Where:

• P = Principal (initial amount in ₹)
• R = Rate of interest per annum (%)
• T = Time in years
• SI = Simple interest earned
• Amount (A) = P + SI

Example 1: Basic Calculation

P = ₹20,000, R = 10% p.a., T = 2 years

SI = (20000 × 10 × 2) / 100 = ₹4,000

Amount = ₹24,000

Example 2: Time in Months

P = ₹50,000, R = 8%, T = 6 months = 0.5 years

SI = (50000 × 8 × 0.5) / 100 = ₹2,000

Example 3: Find Rate

SI = ₹3,000, P = ₹25,000, T = 4 years

R = (SI × 100) / (P × T) = 300000 / 100000 = 12%

When Simple Interest Applies

• Short-term personal loans (some structures)
• Certificate of deposit quotes (sometimes)
• School mathematics and SSC/Banking exam word problems
• Quick estimates before detailed compound analysis

SI vs Compound Interest

Simple interest grows linearly; compound interest grows exponentially because interest earns interest. Compare both with our Simple Interest and Compound Interest calculators.

Frequently Asked Questions

What if time is given in days?

Convert to years: T = days/365 (or 360 for banker’s year in some problems).

Can simple interest exceed principal?

Yes — over long periods at high rates, SI can exceed P (e.g. 100% for 2 years doubles interest to equal P).

Is simple interest used for home loans?

Most Indian home loans use reducing balance (similar to compound monthly), not simple interest. See EMI Calculator.

How do I find principal from SI?

P = (SI × 100) / (R × T)

Does Numverto show the formula substitution?

Yes — the calculator displays each step with your values plugged in.