The amount of interest payable to Kabir at the end of the fourth year will be:

Let's track the outstanding principal balance remaining at the start of each year:Year 1 opening balance: Rs. 1,00,000Year 2 opening balance: $\text{Rs. }1,00,000-\text{Rs. }25,000=\text{Rs. }75,000$ Year 3 opening balance: $\text{Rs. }75,000-\text{Rs. }25,000=\text{Rs. }50,000$ Year 4 opening balance: $\text{Rs. }50,000-\text{Rs. }25,000=\text{Rs. }25,000$ The interest due at the end of the 4th year is calculated on this remaining outstanding balance of Rs. 25,000:
$$\text{Interest for Year 4}=\text{Rs. }25,000\times \frac{12}{100}=\text{Rs. }3,000$$