The formula: SI = P × R × T ÷ 100
For ₹1,00,000 at 8% per annum over 3 years: ₹1,00,000 × 8 × 3 ÷ 100 = ₹24,000 in interest, for a total amount of ₹1,24,000.
Interest scales in a straight line with time
The same ₹1,00,000 at 8% over 10 years instead — more than 3 times the duration — gives exactly ₹80,000 in interest, precisely 10/3 times the 3-year figure. Simple interest always scales this way: double the time, double the interest, with no acceleration.
Why it never accelerates
Interest is calculated only on the original ₹1,00,000 principal every single year — none of the interest already earned gets added back in to earn further interest. This is the defining difference from compound interest, where each period's interest becomes part of the base the next period's interest is calculated on.
Where simple interest actually shows up
Most everyday bank loans and deposits in India use compound (or reducing-balance) interest instead — simple interest appears mainly in certain short-term loans and fixed-tenure instruments. Understanding it matters mostly as the baseline for seeing how much more compound interest earns over the same period, covered in the companion article.