The Direct Answer
The 20% Final Withholding Tax is the amount your bank keeps from the interest you earn on ordinary peso deposits and similar products. A 5% gross rate is really 4% after tax.
Most people compare the headline rate and stop there. That is the wrong number to optimize for in the Philippines.
The number you keep matters more than the number the bank advertises.
What the 20% Final Withholding Tax is
The tax is withheld before the interest reaches your account. You do not file a separate payment for most savings products. The bank handles the withholding and credits you the net amount.
Practical examples
| Gross rate | Gross earnings on PHP 100,000 | After-tax earnings |
|---|---|---|
| 3.0% | PHP 3,000 | PHP 2,400 |
| 4.0% | PHP 4,000 | PHP 3,200 |
| 5.0% | PHP 5,000 | PHP 4,000 |
| 12.0% | PHP 12,000 | PHP 9,600 |
That 20% haircut is why Truva reminds you that listed rates and estimates are before tax.
Which products are taxed
- Ordinary peso savings accounts
- Time deposits
- Most bank deposits that earn interest
Which products are exempt or treated differently
- MP2
- Other products or investors explicitly covered by a tax exemption
Turn this into a decision
Compare advertised rates with tax in mind
Use the live comparison desk and remember that banks may deduct tax before interest reaches your account.
After-tax examples that matter
If you keep PHP 250,000 in a bank account that advertises 5%, the gross annual interest is PHP 12,500. After the 20% withholding tax, you keep PHP 10,000.
If you keep the same PHP 250,000 in a product that earns 4%, the gross annual interest is PHP 10,000. After tax, you keep PHP 8,000.
The difference is not academic. It is money you either keep or lose.
When the tax changes the answer
If two products have similar headline rates, the after-tax comparison should decide the winner.
If one product is tax-exempt and another is not, the tax-exempt option can win even at a lower headline rate.
Frequently asked questions
Is the tax applied every month?
Yes, the withholding happens when the interest is credited according to the product rules.
Do I need to calculate it myself?
No. The bank handles the withholding. Truva product listings show advertised rates before tax, so keep the deduction in mind when comparing products.
Why does Truva show advertised rates on product listings?
Because that is the rate the bank publishes and the rate users see on the bank's own site or app. We add tax reminders so the comparison stays clear.
Conclusion
The right comparison starts with the advertised rate, then checks tax, lock-in, conditions, and whether you can realistically keep the rate.
