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Simple Interest Formula:
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Simple interest is a method of calculating interest on savings or loans where interest is calculated only on the principal amount. It's commonly used for short-term investments and personal loans in India.
The calculator uses the simple interest formula:
Where:
Explanation: The formula calculates the interest earned based on the principal amount, interest rate, and time period. The result is divided by 100 to convert the percentage rate to a decimal.
Details: Calculating interest helps Indian savers understand their potential earnings from savings accounts, fixed deposits, and other investment products. It's essential for financial planning and comparing different investment options.
Tips: Enter principal amount in INR, annual interest rate as a percentage, and time period in years. All values must be positive numbers.
Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both principal and accumulated interest.
Q2: Are Indian bank savings accounts based on simple interest?
A: Most Indian savings accounts use compound interest, but some fixed deposit schemes and personal loans may use simple interest calculations.
Q3: How often is interest typically paid in India?
A: Interest payment frequency varies - quarterly for savings accounts, and at maturity for fixed deposits, though some offer monthly interest options.
Q4: Are there tax implications on interest earned?
A: Yes, interest earned from savings and investments in India is taxable under the Income Tax Act, though some exemptions may apply.
Q5: Can I use this calculator for loan interest calculations?
A: Yes, this calculator works for both savings interest and simple interest loan calculations, though most loans in India use compound interest.