Calendar Days vs 30-Day Month: Which Interest Method Should You Use?
Two ways of counting days give two different interest figures. Learn how the calendar method and the 30-day (360-day year) method work, with examples and when to use each.
How to Calculate Byaj (Interest) at “₹ per 100 per Month” — With Examples
A simple guide to calculating interest the traditional Indian way — rate per ₹100 per month, counting days, yearly compounding and part payments — with worked examples.
₹2 सैकड़ाByaj, the traditional way
Walk into any jeweller, grain merchant or village money lender and ask about a loan, and you will hear a rate like “do rupaye saikda” — ₹2 per ₹100 per month. It is the most common way interest is quoted in India outside of banks, yet most online calculators only understand annual percentages and EMIs. This guide explains the method step by step.
What “₹2 per 100 per month” means
The rate tells you how many rupees of interest are charged for every ₹100 for one month. So at ₹2 per 100 per month:
- ₹100 earns ₹2 a month.
- ₹50,000 earns ₹1,000 a month (50,000 ÷ 100 × 2).
- Over 12 months that is ₹12,000 — a simple annual rate of 24%.
A quick conversion: monthly rate × 12 = simple annual rate. ₹1 per 100 is 12% a year, ₹1.5 is 18%, ₹2 is 24% and ₹3 is 36%.
The basic formula
Because the rate is per month, and a month is taken as 30 days, the interest for any number of days is:
Interest = Principal × Rate ÷ 100 × Days ÷ 30
Example: ₹50,000 is given on 1 January 2026 at ₹2 per 100 per month and returned on 15 April 2026.
| Month | Days counted |
|---|---|
| January (1st–31st) | 31 |
| February | 28 |
| March | 31 |
| April (1st–15th) | 15 |
| Total | 105 days |
Interest = 50,000 × 2 ÷ 100 × 105 ÷ 30 = 1,000 × 3.5 = ₹3,500. The customer returns ₹53,500.
Counting days: why both dates count
In traditional lending, the day the money is given and the day it comes back are both counted. That is why 1 January to 15 April above is 105 days and not 104. Ordinary date-difference tools give one day less — a small error that adds up across hundreds of loans.
Some businesses also count every month as exactly 30 days (a 360-day year). That method gives slightly different answers; we compare both in Calendar days vs 30-day month.
Yearly compounding: interest on interest
If a loan runs longer than a year and the interest has not been paid, the traditional rule is to add that year’s interest to the principal. The next year’s interest is then calculated on the bigger amount.
Example: ₹1,00,000 at ₹1.5 per 100 per month from 1 April 2024 to 31 March 2026 (calendar days):
| Period | Principal | Days | Interest |
|---|---|---|---|
| 1 Apr 2024 – 31 Mar 2025 | ₹1,00,000 | 365 | ₹18,250 |
| 1 Apr 2025 – 31 Mar 2026 | ₹1,18,250 | 365 | ₹21,581 |
| Total | 730 | ₹39,831 |
Without compounding the interest would be ₹36,500. Compounding adds ₹3,331 — and the difference grows quickly in the third and fourth year.
Tip: do not round in between. Round only the final figure. Rounding each year’s interest first can change the answer by a few rupees, which is exactly the kind of difference that causes arguments at settlement time.
What happens with part payments
When a borrower pays part of the dues, the usual practice is:
- Calculate the interest up to the payment date.
- Apply the payment to interest first, then to principal.
- Any interest still unpaid stays pending and is compounded at the next yearly boundary.
Doing this by hand for a party with three or four loans is where most errors happen. Software like Vyapari Khatabook does it automatically and prints a receipt showing how the payment was split across each loan.
Do it in seconds
You can try these rules right now with the quick calculator on the Loan Calculator page. The desktop Loan Calculator adds multiple loans per customer, marked totals and a Hindi or English print view for the counter.