Payback Period
✓ Last verified 14 Sep 2026
The short version
Payback period is simply how long it takes for an investment's returns to add up to what you originally put in - a quick, intuitive gut-check, though it ignores what happens after that point.
If you spend ₹2,00,000 on something that generates ₹50,000 a year, the payback period is 4 years - the point at which you've recovered your original outlay. It's popular precisely because it's easy to understand without any discounting math, and it gives a rough sense of how long your money is at risk before you've at least broken even. Its main weakness: it ignores everything that happens after the payback point, and it doesn't account for the time value of money the way NPV does - a decision with a shorter payback period isn't automatically the better one if it also produces far less value in later years.
Want this worked out for your own numbers?