How it is calculated
Accrued = (F × c / f) × (days since last coupon / days in coupon period)- F : face value; c, annual coupon rate; f, coupon payments per year
- F × c / f is one full coupon payment
- Days are counted 30/360 for Indian corporate bonds, every month is 30 days
A worked example
- 1A ₹1,00,000 NCD pays 10% semi-annually, with coupon dates on 30 June and 31 December.
- 2One full coupon is ₹1,00,000 × 10% ÷ 2 = ₹5,000.
- 3You settle on 31 March, exactly 90 days into the 180-day period on a 30/360 count.
- 4Accrued interest = ₹5,000 × 90 / 180 = ₹2,500.
If the clean price is ₹98,000, you pay ₹1,00,500 on settlement. On 30 June you receive the entire ₹5,000 coupon, of which ₹2,500 reimburses what you advanced. Your true interest income for the period is the other ₹2,500, the part you actually earned by holding.
The 30/360 day count, and when it does not apply
Indian corporate bonds and NCDs conventionally accrue on a 30/360 basis: every month counts as 30 days and every year as 360. It is a simplification that predates computers and survives because it makes coupon periods equal and the arithmetic predictable.
Government securities use actual/actual instead, counting real calendar days against the real length of the coupon period. The two conventions disagree by a few rupees per lakh, small, but enough to make your figure differ from the broker's if you apply the wrong one.
A practical consequence of 30/360: February is treated as having 30 days, and the 31st of a month counts the same as the 30th. If your hand calculation is off by a day or two around a month end, this is usually why.
Why accrued interest is not a cost
Accrued interest raises the amount you pay but not the price of the bond. You advance the seller their earned interest, and the next coupon returns it to you in full. Over the whole holding it nets to zero.
It does matter for tax, though, and the treatment is not obvious. The full coupon lands in your account and may be reported as your interest income, even though part of it was a reimbursement of your own money. Keep the contract note showing the accrued component, it is the evidence for treating that part as a return of capital rather than income.
Where the numbers come from
Coupon dates are anchored to the redemption date, not to the issue date, so this calculator steps backwards from maturity in even intervals to find the period containing your settlement date. Working forwards from issue produces a stub period in the wrong place and an accrual that is quietly wrong for every bond not sitting on an exact coupon date.
If a coupon date falls on a holiday, the actual payment shifts under the issue's business-day convention, but accrual is normally still computed on the scheduled date. Check the information memorandum for the specific issue when a coupon date lands on a weekend or a market holiday.
Frequently asked questions
Do I get accrued interest back?+
Yes. You pay it to the seller at settlement and recover it at the next coupon, when the full coupon is paid to you regardless of how long you have held the bond. It is a timing adjustment between buyer and seller, not a fee.
Is accrued interest taxable?+
The portion you paid the seller is a reimbursement, not income, so it should not be taxed as your interest. The full coupon may still be reported to you gross, which is why the contract note showing the accrued split matters at filing time. For anything material, take this to your tax adviser rather than relying on a calculator.
Why does my broker's accrued interest differ from this figure?+
Almost always the day-count convention or the settlement date. Check whether the bond accrues 30/360 or actual/actual, and whether the broker is counting to the trade date or the settlement date, Indian bond settlement is typically T+1, so a one-day difference in the input produces a small difference in the output.
What happens if I buy on the coupon date itself?+
Accrued interest is zero, because a fresh coupon period has just begun. Note that the coupon is paid to whoever held the bond on the record date, which is a few days before the payment date, so buying on or just before a coupon date does not entitle you to that coupon.