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How to compute your Time Deposit income


We recently received an email from one of our readers asking how to determine the interest earnings on his time deposit account. In response, we explain below how exactly it’s being computed.

Interest on a Peso Time Deposit account

Let’s assume we opened a P100,000 time deposit account that earns 2.0% per annum. We let it stay for 35 days. Considering the 20% withholding tax charged to peso time deposits, the interest income on the account is:

  • P100,000 * 2.0% * (35 / 365 days) * 0.80 = P153.42

Most people usually think that when they are quoted an interest rate (2.0% in this case), they will get that interest no matter how long the holding period is. This is wrong. That quoted rate is an annual rate and you only earn it if you let the bank hold your money for one year.

In our example above, your principal of P100,000 would earn only the share of 35/365 of the 2.0% per annum rate, representing 35 days out of 365 days in a year that the money is with the bank. (The convention is usually 365 days but some banks may use 360 days in the computation.)

You also need to consider the 20% withholding tax charged on interest income from time deposits. This is represented by the “0.80” in our formula above, which means, we are getting 80% of the total interest only, because we deducted the 20% withholding tax.

Thus, for a P100,000 money placed for 35 days in a time deposit (TD) paying 2.0% interest per annum, the net interest income is  P153.42. A bit small, indeed, compared to the principal placed. But then again, time deposit accounts are covered by the Philippine Deposit Insurance Corporation, which means they are virtually safe, so in effect you don’t get much return because there’s not much risk associated with a TD account.

PreTermination of Time Deposit

Do note that most banks do not allow pre-termination of your time deposit. It is possible that you will incur a loss if you redeem or close the account prior to the set maturity date.

That’s because the Documentary Stamp Tax (DST), which the bank usually shoulders if the account is held until maturity, will now be passed on to you. Most of the time, this DST is more than the interest you earned, which means your principal can even be reduced. We thus highly encourage you to wait for the time deposit to mature rather than preterminating it.

Related Reading: Banking, Insurance and Credit Cards discussion at the PMT Forum






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64 thoughts on “How to compute your Time Deposit income”

  1. Jay Castillo says:

    Thanks James for posting this. Should help people easily compare the returns they would get from time deposits with other faster investment vehicles.
    .-= Jay Castillo´s latest blog ..Sealed bidding of Prime Properties from PNB slated on March 5, 2010 =-.

    1. Francis Antonio Nessia says:

      sir mag kano bah makukuha mong interest sa time deposit 50,000 sa 6.73%

    2. Meet Joe B says:

      If for one year: P50,000 * 6.73% * (365 / 365 days) * 0.80 = P2,692.00

      You’re rate is too high, most banks only give max of 2% per annum interest. :)

    3. Liezel Antioquia says:

      sir magkano po kaya magiging tubo kapag nag deposit po ako sa time deposit ng 500k in five years? medyo slow lang po sa computation,at nakakalito kase. thank you po. gudeve.

    4. Liezel Antioquia says:

      i mean kung halimbawa lang po magdeposit po ako ng 500k for 5 years hehe

  2. Diabetis says:

    I could use this when I got my own time deposit account.
    .-= Diabetis´s latest blog ..Weight Gains during pregnancy has greater risk of having diabetes =-.

  3. jonharules says:

    Magaling, at least may idea na ako bakit nagvavary yung interest na nakukuha ko every month.

  4. Victorino says:

    Nice “how to” article. That’s right we should also consider the tax in computing interest income. If you do business and your paying interest expense. Your deductible interest expense in computing income tax depends on your interest income earned.

  5. Jonha says:

    Mas maganda parin mag invest nalang sa real-estate.
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  6. efren reyes says:

    Can you please update the list of banks who have double your money account. Thank you.

  7. marc says:

    meron ako nakita dito double your money program from dbp .

    http://www.pesorepublic.com/db/banking-and-insurance/

  8. ronald says:

    I have a question though, since 20% is deducted then we do not need to include or declare this in the computation of our annual taxes?

  9. Tey says:

    Wow! Thank u so much for this information. All along I though ganun kalaki magiging interest ng money ko sa TD, liit lang pala.. But at least its safe (from my spending habit). HaHa! Thanks again.

  10. NorahJones says:

    what does the P153.42 in the equation “P100,000 * 2.0% * (35 / 365 days) * 0.80 = P153.42” represent? does it represent the daily interest or the yearly interest?

    1. James | PinoyMoneyTalk.com says:

      It’s the interest income your P100,000 would earn assuming annual interest rate of 2% and the money remained in the account for 35 days.

    2. Rain says:

      so it means every 35 days you will earn the assuming annaul interest rate of 2%?

  11. Gettyfv says:

    Sir,

    hanggang 1 year lang ba ang time deposit o pwede hanggang 10 years? Me and my wife are planning to invest in time deposit for the college education of our son… What can you advice about our plan?

    1. James | PinoyMoneyTalk.com says:

      Hi Gettyfv, if you have a 10-year investment horizon, I suggest you look at investment products rather than mere time deposits. You’re bound to earn more without taking too much risk. Check out our articles here on possible investment options: https://www.pinoymoneytalk.com/investing-guide/

  12. Alvinjamesabalos says:

    guys meron akong magandang business opportunity,, its about leverage income,, you can research it.. V MOBILE TECHNOLOGIES INC. here is muy number.. 090476944569..09334521955

  13. Bunsoy_10108 says:

    mgbabago po ba ang computation of ng withdraw dun sa time deposit? panu po ang computation nun?

    1. James | PinoyMoneyTalk.com says:

      Hi Bunsoy, magbabago ang computation ng time deposit kapag may withdrawal sa principal amount. Bababa ang numerator (principal amount) pero fixed pa rin ang interest rate kaya bababa rin ang total interest earned ng time deposit mo.

    2. James | PinoyMoneyTalk.com says:

      Hi Bunsoy, magbabago ang computation ng time deposit kapag may withdrawal sa principal amount. Bababa ang numerator (principal amount) pero fixed pa rin ang interest rate kaya bababa rin ang total interest earned ng time deposit mo.

    3. flor lucero says:

      Akala ko nga rin malaki ang tubo ng time deposit.ayy kulang pa sa pamasahi.nag time deposit ako ng 100k sa metro bank after 6 months kinuha ko.ang tubo 300 pesos binawasan pa ng tax at kung ano ano pa.ang net enterest ng 300 ay 90 pesos sa loob ng 6 months.

  14. Loanshark master says:

    so kapag nag deposit ako ng 500,000php sa time deposit ang tubo nya kada 35 days ay 2%?

    ibig sabihin 10,000 kada 35 days? 

    1. Janzen Javier says:

      mali, 
      500,000 * 2% = 10,000 in 12months  * (months kung gano na katagal yung deposit mo na hindi ginagalaw) / 12(months) = “yung kinita ng pera mo” tandaan mo yung interest, year ang bilangansample natin in 2 months 500000 * 2.0% = 10,000 * 2 = 20,000 / 12  =  1,666.67 < interest ng 500,000 pesos mo in 2 months or 60 days.hindi pa ito exact meron pang mga taxes, etc.. etc yan… para maliwanagan ka lang..sana makatulong

    2. kuya kim says:

      ang masakit pa…un words na… w/o prior notice.. if you know what i mean

    3. Niko Ryan Codilana says:

      No ang 2% ay sa isang taon na tubo at tatanggalan pa ng 20% na tax..

  15. Patransfiguracion says:

    hanggang mag kano ang pwede i time deposit o mag kano ang pwede i time deposit???

    1. Niko Ryan Codilana says:

      Hi,
      You might want to check sun life of Canada.pls pm me.we have 4% to 13% historical return..

      Thanks
      Niko

  16. Marphel Sabida says:

    Ask ko lang po kung ilang mos. Na ung contribution ko at mag kno na po
    .. salamat

  17. entomologia says:

    panu po pag may ang sabi 30-60 days 1.25%, 6-90 days 1.5% then 91-120days 1.75% tapos naglagay ako ng 10,000 for 120 days, panu po kinocompute un?

    1. Meet Joe B says:

      You use 1.75% rate. Using the formula above: P10,000 * 1.75% * (120 / 365 days) * 0.80 = P46.03

    2. Aneera says:

      Kapag ng deposit aq ng 500k for 1 year,magkno kaya aabutin and ilan ba per annum?

    3. Sunshine Reyes says:

      saang banko ito? Ang laki ng tubo nila ah, maganda jan ^_^

  18. arvie valeros says:

    When you go to a bank, the quoted time deposit rates are the standard. However, banks normally can still add around .25% to .5% on top of these quoted rates. For time deposit rates comparison, you may visit http://pinoybanker.blogspot.com

  19. abu fayed says:

    Sir, Maraming Salamat po sa guide nyo. Laking confort ito sa amin.

  20. Boin Bias says:

    sir anong bank ang pinaka suggest niyo na mas malaki ang interest and stable..ty

    1. Niko Ryan Codilana says:

      Hi sir,
      This is Niko from sun life of Canada.
      we have investment medium na you might want to know.
      Pls pm me for more info.the rate of return of investment range from 4% to 13% per annum.

      Thanks
      Niko

  21. eirvenlatasa says:

    meron po bang mas detailed na explanation ng calculation? for example sa savings account po na merong lang 0.5 interest rate per annum tapos ang deposit ko ay 50,000 php how much ma eearn ko after a year?. kakalito calculate. T_T (not a finance, business, and etc. major)

    1. Meet Joe B says:

      P200 :)

  22. Meet Joe B says:

    Thanks for this helpful info!

  23. bee says:

    hi. would like to know how much interest will be using BPI Direct TD rates for 50k at 35days: 0.625 and for 364days: 0.875. Thanks

    1. Niko Ryan Codilana says:

      Hi sir,
      You might want to invest in si life of canada..a much higher return of investment than TD.

      THANKs
      Niko

  24. khaile says:

    good morning po ask kulang po sana kung mag knu po ang kabu-ohang matatanggap nyu po sa 1yr if nag deposit po kayo ng 100k sa TD (bpi), ito po yung 35days:0.750 tapos po yung364 days nya :1,000 po.

    1. jaweee says:

      (100,000) x (0.75/100) x (365/365) x (0.8) = 600 pesos lol an liit grrr

      (100,000) x (0.75/100) x (30/365) x (0.8) = 49.3 pesos per month. may pamasahe kana hahha

  25. Venessa Kach says:

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  26. Pitbulldog says:

    Linsiyok na Time Deposit yan. Kahit may isang milyon ka pala, sa Time Deposit, parang pinatulog mo ang pera mo sa loob ng isang taon. Aba, kahit kalahati niyan i 5-6 mo, baka di lang triple ang aabutin ng pera mo. I-time deposit mo, say for one year, sasakalin ka pa dahil kung kailangan mo yan nang wala pang isang taon na napagkasunduan, may penalty ka. Kamuka’t mukat, may utang ka pa sa bangko, he, he he.

  27. Myleen Dogelio says:

    Good day! pwede po mag tanong? magkano po ang matatanggap kung interest sa 100,000 for 30 days in 0.50% interest per anum sa BDO. Thank you

    1. Niko Ryan Codilana says:

      Hi mam
      100,000×0.50%x(30/365)x.80=32.876 pesos only.

      You might want to invest in sunlife.we have a much higher return of investment
      Ranging from 4% to 13% per annum.pls do pm me.

      tnx

      Niko

  28. monet defeo says:

    opo. kaya it’s better po to put your money in prulife uk pia plus.(just one the products)

    minimum deposit is P100k.

    after a yr, kita na money mo ng P420 kesa sa P160 sa bank.
    may Protection ka pa if you’ll have illness and/or accidents wothh P100k each.
    (computed based on a 51 yr old insured. )

    in 8 yrs, double na P100k mo.

    Note: Pru Life UK is NOT connected with other prudential companies in the Philippines.

    you may txt me at 09428005004 for more info.
    email at monetdefeo@yahoo.com

  29. YSsen says:

    For example:

    100,000 x 0.50% x (30/365) x.80 = 32.876 pesos only.

    It means, 32.87php/mo x 12= 340 ang interest ng 100k mo yearly? so, after 5 years, 1,700php total ng interest makukuha mo plus the 100k you deposited?
    tama ba?

    1. Mae Yere Canay says:

      Sa stock market nalang! Ung 9k ko sa jolibee may kita na ngayon na 2500 in just 1 year! 22% lang nmn hahaha! Anong sinabe ng time deposit?!

  30. Zeegoodman Nizhe says:

    Putang ina. Walang kwenta pala yang time deposit na yan. bobo talaga ang papasok ng ganito. gagamitin nila pera mo tapos ang laki kapag sila ang magfinance. tapos sayo in 35 days. 1 hundred plus lang. Mga gago pala itong mga bangko eh. No wonder 60% of the Philippine population does not have a bank account. Mga scammer pala tong mga gago eh.

    1. Nankurunaisa Nankuru says:

      Gago ganyan din sa ibang bansa. mas mababa pa nga.

    2. Mae Yere Canay says:

      Kasi naman gagamitin nila yan pang business etc etc. Kung magkano kitain nila ay bgyan kalang ng katiting at un ang maging interes ng pera mo na ginamit nila hehe. Masaklap pero yan ang katotohanan. Kaya ako sa stock market ako. Atleast! Malayong mas malaki kita ko kesa sa sa interes ng banko. Eh ang bangko kasi iinvest din nila ung pera mo sa kung saan saan eh ipautang din dba tas anlaki ng tubo. Kaya nga time deposit dahil para alam nila kung hanggang kelan pwedeng gamitin ung pera mo. Kung baga may deadline. Para pag umutang sa kanila c customer dapat hanggang ganito mabayaran mo na. O dba. Kaya kung madiskarte din tayo eh tayo ang uutang sa banko at ipang negosyo. Tama? O kaya uutang ka sa bangko at ipa 5-6 mo e de natalo mo sila haha!

  31. Justine Emmanuel Relano says:

    Mas magandang mag join ka nalang dito sa popular communty, Kung nagbigay ka dito ang pwede mo naman hingiin sa community is 30% na binigay mo kasama rin ung binigay mo, so meaning 30% monthly ang pwede mo hingiin :) Kesa naman mag Time Deposit ka napakaliit!

    Sa Community na ito ang goal dito ay sirain ang financial system na nakasanayan na tulad sa bangko na napakaliit ng binibigay sa mga depositors!

    Let me give a example kung paano pinapatakbo/kumikita ang bank using thin Air. Sabihin na natin na si Mr. Janson ang Bangko. at si Mike at Angelica ang Depsoitors. Ngayon Si Mike ay may nagustuhan na bike worth 2000 Pesos at ang bike shop na iyon ay kay Angelica. Ngayon si Mike ay may 200 pesos lang sa kanyang bulsa at sinabi nya kay angelica na pauna nya muna ung 200 pesos wag nya lang ibenta sa iba at nag OO naman si Angelica. At Si Angelica ay pupunta sya sa Bank para mag deposit ng 200 pesos para sa savings nya. Ngayon naman si Mike ay nag-iisip kung saan sya kukuha ng 1,800 pesos para mabili at makuha na nya ung bike na gustong gusto nya at ang naiisip nya ay pupunta sya kay Mr. Janson “the bank” at hihiram sya ng pera na 1,800 pesos pero sabi ni Mr. Janson ay 200 pesos lang muna ang pwede nya ipahiram then after 3 days balik ka dito. Ok so nakahiram si Mike ng 200 pesos at agad naman nya na ibinayad kay Angelica. at si Angelica deniposit ulit nya sa banko nya ung 200 pesos then after 3 days ulit pumunta ulit si Mike sa bangko at binigyan nanaman sya ni Mr. Janson ng 200 pesos. Hanggang mabuo nya ang 1,800 pesos. The same Scenario lang ang mangyayari. So ngayon nabili na ni Mike ang pinaka-gugusto nyang bike na worth 2000 pesos pero naka utang sya kay Mr. Janson “the Bank” at si Angelica naman ay kumita na ng 2000 Pesos na halaga ng bike. So sino ang tuwang tuwa ngayon syempre lahat sila kasi nabili ni Mike ung gusto nya, si Angelica naman nabenta nya ung tinda nyang bike at si Mr Janson “the Bank”. Pero sa katunayan si Mr. Janson ang pinaka natuwa kasi kumita sya ng pera using Thin Air! So meaning kumita sya ng walang nilabas na pera! Dahil nagkautang si Mike ng 1,800 pesos plus interest pa sa kanya kung kailan nya babayaran. So makikita nyu na ang bangko ang lalong yumayaman hindi ang depositors dahil ginagamit ang pera nyu para sa ikakayaman pa nila lalo!

    Kaya sa mga gustong masubukan ang “Power Of Giving” Kung tumulong ka, ikaw ay tutulungan rin. Dito sa Financial Community ikaw makaka-hingi ng 30% monthly sa binigay mong pera malayong malayo sa Time Deposit.

    Ok I will give an Example. Let say you provide help an amount 100,000 pesos in 1 month you can get help an amount of 130,000 pesos. Full principal back. Mahirap man paniwalaan pero kung d mo susubukan hindi mo malalaman. BUT THIS IS NOT A HYIP!

    This is a community of ordinary people, selflessly helping each other, a kind of the Global Fund of mutual aid. This is the first sprout of something new in the modern soulless and ruthless world of greed and hard cash. The goal here is not the money. The goal is to destroy the world’s unjust financial system.

    Minimum Provide Help: 200 pesos

    Maximum Provide Help: 400,000 pesos

    If you want to join

    Register your free account here: http://bit.ly/FillupFormHere

    Join our group here: http://bit.ly/joinourfacebookgrouphere

    Add me in Facebook:

    Message/Call me here: +639275727706

  32. Arthur Alcantara says:

    Traffic Monsoon Revenue Sharing Company mas malaki ang interest na perang iinvest nyo dito halimbawa $1000.00 magiging $1100.00 in just 55 days (mature date) just pm or call me @ +966506778406 for more details

  33. Hannah Rivere says:

    Help po to decide. I have time deposit account sa bdo. Actually kahapon ko lang nalaman na i do have kasi 2006 pa yun bata pa ko, lola ko pala nagopen nun for me. Haha So nagulat ako kasi pinapunta ko sa bank kasi daw walang signature ko e iba a nun yung pirma ko so pinarenew yung profile chuchu basta may pinafillup-an sakin then she asked me of 2 valid id at pinapahanap sakin yung certificate ba yun na form, pag nawala daw papagawa na lang daw loss of affidavit. e nawala na.. hindi ko lam gagawin if papaterminate ko na kasi 3k lang naman balance ng acc hhahha pero malaki ba charge ng termination? maturity date niya is september pa. what shall i do? someone please reply

  34. benjo says:

    mag puhunan nalang ako ng isang daan mag luto ng GOTO kikita pa ako ng 200H pataas sa isang araw kaysa mag TD ako sa mga banko na yan he he he sila lang ang buhay tayo naka nganga

    1. Mae Yere Canay says:

      Tama! Or in stock market hehe.

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  36. M.A says:

    Hi po… mmmm ganyan po b tlga kaliit ang kikitain kpg per annum mo i TD Ung pera sa bank??? Nguluhn tuloy aq.. kc nung pinacompute q po ung intrest na makukuha sa 50k for 6mons. Is 128000 hndi p ksma ung principl na time deposit q.. kpag 3mons nmn po 51000 k ang pagkakaalala q po..

    Mmmm nppaicp tuloy aq.. haha?? qng ganun nga mkukuha q?

  37. Retchie Rocha says:

    Ask ko Lang po Kung magkano Yung tutubuin ko pag na TD ako for 5years

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