Interest Income Tax 15.4%: What Actually Remains from KRW 1 Million in Interest

15.4% Is the Sum of Two Taxes

It is easy to assume that a single tax applies to interest, but 15.4% is the sum of two different taxes.

First, income tax of 14% applies. Article 129 of the Income Tax Act sets withholding tax rates by type of income, and interest that falls under other interest income, such as deposits and installment savings, is taxed at 14 per 100.

Local income tax follows. Article 103-13 of the Local Tax Act requires 10 per 100 of the income tax withheld to be collected together as individual local income tax. That is 10% of the 14% income tax, which comes to 1.4%.

Adding the two gives 15.4%. The decimal point appears not because the rate was set separately at 15.4%, but because 10% of the 14% was added on top.

The party that withholds the tax is the financial institution. It deducts the amount before paying the interest and deposits only the remainder, so the interest shown in your account already has the tax removed.

How Much Remains by Interest Amount

These are the tax amounts and actual deposits calculated by applying 15.4% to the pre-tax interest.

Based on general taxation. Savings that qualify for tax exemption or preferential taxation are subject to different rates.

Viewed by Principal Amount

If principal is more familiar than interest amounts, here is the same calculation. This assumes 2.5% per year (pre-tax) held for one year.

2.5% per year is a figure used to show the calculation structure, not a published rate for any specific product. To calculate with your own amount and rate, use the interest calculator.

Holding KRW 100 million at 2.5% per year for one year produces a tax of KRW 385,000. In the same table, when the principal increases 100 times, the tax increases exactly 100 times. Interest income tax is a flat rate that does not rise as the amount grows.

The point where the rate changes lies elsewhere. If the interest and dividends received during the year exceed KRW 20 million, the excess is aggregated with other income and becomes subject to comprehensive taxation of financial income.

Calculating the principal required to reach that amount by rate gives KRW 1 billion at 2.0% per year, KRW 800 million at 2.5%, about KRW 666.67 million at 3.0%, and KRW 500 million at 4.0%. The higher the rate, the less principal it takes to reach KRW 20 million. This calculation looks only at deposit interest; in practice, dividends and other financial income are counted together.

The Order of Subtraction Splits KRW 1

When you calculate after-tax interest yourself, the result sometimes differs from what the financial institution paid by KRW 1. The cause is not the multiplier but the order of calculation.

The correct order is to round the tax to the nearest won first, then subtract that tax from the pre-tax interest. If you calculate the after-tax amount first and drop the decimals, the result shows KRW 1 more tax deducted.

Pre-tax interest is calculated as principal × annual rate × days ÷ 365, with amounts below one won dropped.

It is KRW 1 on a single account, but the gap widens with the number of accounts. When your figure differs from the institution's statement, check this order before the rate.

Not All Interest Is Taxed at 15.4%

15.4% applies to interest earned on money entrusted to a financial institution, such as deposits, installment savings, and parking accounts. When the nature of the interest differs, so does the rate.

Profit from non-business loans is interest received by a person who does not run a lending business. Interest from a loan between individuals falls here, and the rate of 27.5% is 12.1 percentage points higher than on deposit interest. On KRW 1 million pre-tax, the tax is KRW 275,000, which is KRW 121,000 more than if it had been deposit interest. On KRW 10 million pre-tax, the tax is KRW 2,750,000 and the gap widens to KRW 1,210,000.

Even for the same loan between individuals, interest received through an online investment-linked finance provider registered with the Financial Services Commission is taxed at 14%. Including local income tax, that comes to 15.4%, the same as deposit interest.

Excess refunds from a workplace mutual aid association work differently. They are calculated at the basic tax rate rather than a fixed withholding rate, so the applicable rate rises as the amount grows.

There are also savings taxed at lower rates. Those aged 65 or older, persons with disabilities, and certain other groups can use tax-free comprehensive savings, which impose no income tax on interest up to a principal of KRW 50 million.

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