Decline in deposit interest rates following rate cut: Returns on 1 million and 100 thousand liras revealed

The Central Bank of the Republic of Turkey has lowered the policy rate from 50 percent to 47.5 percent. As deposit interest rates decline, the possibility of an increase in withholding tax rates could reduce returns.

Investments made before January 31 may provide an advantage against the risk of higher withholding taxes.

Here are the details regarding interest rates and return calculations...

DECLINE IN DEPOSIT INTEREST RATES HAS BEGUN

The Central Bank of the Republic of Turkey (TCMB) has lowered the policy interest rate from 50 percent to 47.5 percent. According to a report by Hürriyet, this decision has directly affected the interest rates offered by deposit banks to customers.

With the end of "welcome interest" campaigns, banks are now offering services with lower rates.

HOW WILL THE INTEREST RATE DROP AFFECT RETURNS?

Based on deposit interest rates that have fallen to the 47.5 percent level following the Central Bank's policy rate cut, a depositor who locks 100 thousand liras for a 32-day term earns a net return of 3 thousand 748 liras.

In other words, at the end of the term, their 100 thousand liras increase to 103 thousand 748 liras. Under the same conditions, a person with 1 million liras earns a net return of 37 thousand 479 liras, increasing their 1 million liras to 1 million 37 thousand 479 liras.

JANUARY 31 WITHHOLDING TAX REGULATION IS APPROACHING

In addition to the decline in interest rates, changes to withholding tax rates are expected on January 31.

Existing withholding tax rates on Turkish Lira deposit accounts had been increased from 7.5 percent to 10 percent for 6-month terms, and from 5 percent to 7.5 percent for accounts with terms up to 1 year.

It is stated that these rates could be increased further in the new regulation.

Investors may consider opening 3-month term deposit accounts before January 31 to gain an advantage against a potential withholding tax increase.

This method offers an opportunity to earn higher returns than current interest rates.