Finance Education

Indian Finance Formulas

A masterclass in calculating the numbers that matter for your wealth.

Understanding the math behind your money is the first step toward financial freedom. In India, the financial landscape is governed by specific regulations like GST slabs and the dual-regime income tax system. This guide breaks down the core formulas we use at OrangeTool to power our calculators.

1. GST (Goods & Services Tax)

GST in India is either added to a net price or inclusive in a total price. There are four main slabs: 5%, 12%, 18%, and 28%.

            Add GST: GST Amount = (Original Cost × GST %) / 100

            Remove GST: GST Amount = Total Cost – [Total Cost × {100 / (100 + GST %)}]

2. Loan EMI (Equated Monthly Installment)

Indian banks use the reducing-balance method for home and car loans. This means interest is calculated on the outstanding principal at the end of every month.

            Formula: E = P × r × (1 + r)^n / ((1 + r)^n - 1)

            P = Principal loan amount

            r = Monthly interest rate (Annual rate / 12 / 100)

            n = Loan tenure in months

3. Mutual Fund SIP (Systematic Investment Plan)

SIPs allow you to benefit from "Rupee Cost Averaging" and the power of compounding. We use the Future Value of Annuity formula to project wealth.

            Formula: FV = P × [{(1 + i)^n – 1} / i] × (1 + i)

            P = Monthly investment amount

            i = Monthly interest rate (Projected annual return / 12 / 100)

            n = Total number of installments (Months)

4. Gratuity (Employee Benefit)

Under the Payment of Gratuity Act, 1972, employees are entitled to a lump sum after 5 years of continuous service.

            Formula: Gratuity = (Last Drawn Salary × 15 × Years of Service) / 26
        

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