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Reviewed by CA Divyanshu Sengar · Last reviewed 11 October 2026
Enter the face value, upfront integral fees, annual coupon and term to solve the effective interest rate and see the opening balance, interest, cash paid and closing amortised cost for each year.
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An entity borrowing ₹10 lakh may receive only ₹9.8 lakh after paying integral issue fees of ₹20,000. If the contractual coupon is 8% on face value and principal is repaid at the end, the effective financing cost will exceed the coupon. The interest expense recognised under the effective-interest method progressively accretes the carrying amount until repayment.
The solver discounts annual coupons and final principal to the initial amortised cost, then finds the annual interest rate that equates present value with proceeds net of the selected integral fees. Each subsequent row recognises EIR interest on opening carrying amount and subtracts the period’s cash payment. A final carrying amount close to zero is an essential arithmetic control.
Only fees integral to the financial instrument and qualifying transaction costs belong inside the effective-interest-rate calculation. Service fees, insurance, taxes and non-integral administration charges may require different treatment. The model uses a fixed annual coupon, annual periods and a bullet principal payment, not a floating-rate amortising loan.
EIR expense may be higher than bank cash interest in early periods. Accountants should reconcile original proceeds, issue fees, cash coupon, accrued EIR and closing liability. If terms are modified, prepaid or renegotiated, a modification or derecognition assessment is required; do not simply continue the original schedule without reviewing the event.
Because you receive less than face value (the fees are deducted) but repay the full face value, the true cost of borrowing is more than the coupon rate.
The mathematics is the same for a bond bought at a discount, but fees and presentation differ; check your classification under Ind AS 109.
The initial carrying value may be less than face value because integral transaction costs reduce proceeds.
Rates and rules were checked against these sources on 11 October 2026. Notifications and standards change; confirm on the official site before you file, book or advise.
Educational working tool. Results follow the scope and assumptions above and the figures you enter; they are not tax, audit, legal or accounting advice. Tax and accounting treatment depends on facts and on the law or standard in force for the relevant period, so verify the official source or consult a professional before you rely on a result.
Background, worked examples and the rules behind these numbers.