Simple Interest is calculated only on the principal amount of a loan or deposit, without compounding.
Where: P = Principal Amount, R = Annual Interest Rate, T = Time Period in Years.
You borrow ₹10,000 from a friend at a 5% simple interest rate for 3 years. Every year, you owe exactly ₹500 in interest. Over 3 years, the total interest is ₹1,500.