An accrual fraction is a numerator of days over a denominator of days, and every market has decided both independently. The three that matter, computed on one pair of dates so the difference is visible:
What are the main day count conventions?
30/360 treats every month as 30 days and every year as 360. The American variant adjusts the end date to 30 when it falls on the 31st and the start date is already on the 30th; the European variant, 30E/360, caps both dates at 30 unconditionally. The two agree far more often than they differ, which is exactly why the disagreements are dangerous. From 15 February 2026 to 31 August 2026 the American rule counts 196 days and the European rule counts 195, and on $2,000,000 of a 6.20% semi-annual coupon accruing from 15 February 2027 to 31 May 2027 the two conventions differ by $344.44.
Actual/actual counts the real days elapsed over the real days in the coupon period. The version used on bonds, sometimes labelled actual/actual (ICMA), takes the denominator from the actual coupon period rather than from the calendar year, so a semi-annual bond's denominator is 181 or 184 rather than 365.
Advertisement
Actual/360 counts real days over a 360-day year and is a money-market convention. It is the most generous of the three to the receiver of interest, because it puts real days over a short year, and it is standard on dollar floating-rate notes, commercial paper and interbank deposits.
Run the Indian corporate bond from the opening through all three. The last coupon was 15 June 2026, settlement is 30 September 2026, the next coupon is 15 June 2027, the coupon is 8.40% annual and the face value is ₹10,00,000. Under 30/360 the accrual is 105 days of 360, a fraction of 0.2916666667 and accrued interest of ₹24,500.00. Under actual/actual it is 107 days of 365, a fraction of 0.2931506849 and accrued interest of ₹24,624.66. Under actual/360 it is 107 days of 360, a fraction of 0.2972222222 and accrued interest of ₹24,966.67. On a hundred debentures the spread from lowest to highest is ₹46,666.67.
Which day count convention applies in India and the US?
Which one applies is a matter of market law rather than preference. In India, government securities accrue on a 30/360 basis under the conventions the Fixed Income Money Market and Derivatives Association publishes. Listed corporate debt securities are required to compute interest on an actual/actual basis under the Securities and Exchange Board of India's uniform methodology (check both against the current FIMMDA handbook and the applicable SEBI circular). In the United States, Treasury notes and bonds accrue actual/actual, corporate and municipal bonds conventionally accrue 30/360, and money-market instruments accrue actual/360.
Carrying one market's habit into another market's paper is a reading error rather than a computational one.