Article content
- Annual interest rates
- The deposit profit depends on the number of days in the month
- How to calculate profit from a deposit
- The deposit calculator will help you calculate the deposit income
- Taxation on Deposit Profit
We place deposits to earn additional income. That's why we look for high interest rates and the best offers on the market, as the deposit interest rate directly affects our income. This often becomes a decisive factor when choosing a deposit program. In this article, we will discuss how deposit interest is calculated, how taxes are deduced, how to calculate the net profit from your deposit, and how the deposit calculator can help.
Annual interest rates
It is important to understand that deposit interest rates are expressed annually, not for a month or for the deposit term. This means the percentages refers to 365 calendar days, regardless of the deposit duration. For example, if you open a 6-month deposit at 12% per annum, your income for those 6 months will not be 12% of the deposit amount, but 12% annually, which is approximately 6%. To ensure your expectations match reality, use the deposit calculator available on the website to accurately calculate your deposit profit and avoid surprises.
The deposit profit depends on the number of days in the month
Interest on deposits is accrued daily for the term of the deposit, excluding the first and last days. For added amounts interest accrual starts on the following calendar day.
Please note that if you deposit funds after the end of the bank's operating hours, for example, on Friday at 19:00, interest will start accruing only from Tuesday.
The procedure for calculating and paying interest can be found on the bank's website in the Public offer for individuals section.
How to calculate profit from a deposit
Due to the fact that interest is calculated for each day, and a month can have 30, 31, 28 or 29 days, the amount of interest on the deposit will be different each month.
Suppose, you place a deposit of UAH 100,000 on February 1 at 12% per annum.
The daily rate is 12% / 365 days = 0.0329% per annum.
In February, you will receive funds from the day after the deposit is placed, that is, for February 2-28, which is 27 days. So, on March 1, you will receive interest in the amount of 100000*27*0.0329%=887.67 UAH.
In March, you will receive interest for the 31 calendar days of March, which amounts to 100000*31*0.0329%=1019.18 UAH.
As you can see, the difference between February and March is 131.51 UAH due to varying numbers of days in each month.
Using higher rates or amounts increases this variance. For example, with an 18% per annum and a deposit amount of UAH 200,000, the difference between February and March triples to UAH 394.52.
We can conclude that the amount of interest paid will fluctuate depending on the month, and this is correct.
The deposit calculator will help you calculate the deposit income
A deposit calculator simplifies profit estimation. These tools are available on all bank websites, as well as on various banking and finance websites.
Enter the deposit amount, term, currency, and program details, and the calculator will do the rest. While simple interest is easy to calculate manually, profit on deposits with capitalization is much easier to estimate using a calculator. Interestingly, even a lower nominal interest rate with capitalization may yield higher profits.
For more on capitalized deposits, refer to our article: What is Deposit Capitalization and When is it Beneficial?
Taxation on Deposit Profit
Deposit income is subject to taxation, similar to wages. As of December 1, 2024, taxes include an 18% income tax and a 5% military levy, totaling 23%. The bank deducts these taxes automatically, so you receive the net profit. To calculate your net income, subtract 23% from the accrued amount. All deposit calculators also show post-tax profits, ensuring full transparency.
