How we calculate interest

Rupaye sekda and % a year

Rupaye sekda is interest in rupees on every ₹100 for one month: ₹2 sekda is 2% a month. We always show the yearly figure next to it: 2% a month is 24% a year as simple interest. Converting is ×12 or ÷12, and we never switch a rate between monthly and yearly behind your back.

Counting time: months and days

By default we count the way a bahi does: whole calendar months from the date the money was given, then each leftover day as 1/30 of a month. The first day is not counted and the last day is. ₹50,000 at ₹1.5 sekda from 10 January to 25 April is 3 months 15 days, so the byaj is ₹2,625.

The month-end rule: one month after 31 January is 28 February (29 in a leap year), the same date or the last day of a shorter month. So ₹1,00,000 at ₹2 sekda from 31 January to 28 February is one full month: ₹2,000.

Under More options you can count time the way banks and agreements do instead: actual days ÷ 365, a 30-day month with a 360-day year, or actual days ÷ 360.

Rounding

Inside the engine, interest is kept as an exact fraction. It is rounded to the paisa only once, when it is settled: at a payment, at a compounding rest, or on the date you ask for. Halves round away from zero. Bank EMIs are rounded to the rupee, as banks do, and the last instalment clears what is left.

Payments clear interest first

When money is paid back, it first clears the interest due up to that date and only then reduces the principal. This is the usual rule in India unless both sides agree otherwise. See part payment: interest first or principal first.

Compound interest

With compounding, unpaid interest is added to the principal at each rest (every month, quarter, half-year or year from the start date), and the next interest is charged on the new total. A part of a rest at the end is charged at simple interest.

EMI loans

• The EMI is EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where r is the monthly rate. See the EMI formula.
• There is no direct formula for the rate behind an EMI, so we narrow it down step by step until the EMI matches, the same idea as Excel’s RATE function.
• With a processing fee or other charges, the true rate is worked out on the money you actually receive.
• A flat rate is turned into the equivalent reducing rate the same way: find the EMI it gives, then the rate at which that EMI repays the loan.

How we check it

• The engine has more than a hundred automated tests, run on every change, including bahi examples worked by hand.
• EMI and rate results are cross-checked against the standard spreadsheet functions (PMT, RATE).
• Numbers in our guides are not typed by hand: they are computed by the same engine when the page is built, so the words and the calculators always agree.

Sources and corrections

Where a page mentions a law, a court ruling or an RBI rule, it is based on the original text (RBI circulars and directions, Acts of Parliament and state Acts, published judgments), and the guide shows when it was last checked. If something is uncertain, we say so or leave it out.

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