Capitalization of interest on deposit

Diversity of deposits

capitalization of interest on deposit

Most people have some savings, tend to place them in the bank.At the same time they are often faced with the problem that concerns the choice of the type of deposit.In order to attract depositors banking institutions seeking to provide them with the most complete information.One of the most famous is the capitalization of interest on the deposit.However, this form of investment banking clients know very little, although he belongs to the category of the most profitable.

Theoretical aspects of the capitalization of contributions

try to understand what the interest capitalization of the deposit and how it is implemented in practice.Under this concept implies a regular (monthly and quarterly) increase the amount of money deposited in banks.The capitalization of the contribution made by the addition of a so-called body of the deposit amount of interest accrued for the period.Further interest is calculated already increased the amount of deposit.Therefore, having simple ma

thematical calculations, we can conclude that the revenues on a simple contribution would be lower than brings capitalization of interest on the deposit.thin capitalization And this despite the fact that the proposed percentage of the second type of contribution is slightly lower standard forms deposits.


Depositor deposit issued 50 thousand. Rub., By which the capitalization of interest on the deposit at the rate of 12%.In standard form the bank's customer deposit income will be 6.0 thousand. Rubles.When capitalization - 6.3 thousand. Rubles.The most favorable is the capitalization of interest on a deposit when you make a deposit for a longer period.For example, the contribution of 10 thousand. Rub.with an annual rate of 9% a century later it will be the sum of 100 million. rubles for the standard form of a deposit, and 50 billion. rubles - with capitalization.However, not every investor wants to place their savings in a long time.Suffice it profitable for the bank's customers are deposits with a capitalization of not involving the establishment of a return bank interest received in the event of early withdrawal amount.

concept of thin capitalization

capitalization contribution Sometimes investors combine or confuse the two concepts - the "thin capitalization" and "capitalization of interest."However, this is different terms.Thin capitalization is a term tax or special legislation on joint-stock companies.Also, the term is widely used in tax planning.Thin capitalization is sometimes used by unscrupulous taxpayers to reduce tax liabilities.To avoid this, the tax law and agreements to avoid double taxation often included measures such as:

  • specification of terms such as "dividends" and "interest";
  • restrictions on the use of tax breaks and deductions for the various transactions concluded between related parties;
  • restriction and prohibition of subtracting the amount of interest paid that exceed the Central Bank refinancing rate.