Interest compounds untouched until maturity, and tax is charged once on the total interest at the end.
With maturity taxation the tax is deferred and the full gross interest is credited to the balance until the plan ends, so it compounds untouched. Tax is then charged once on the total interest, which leaves a slightly larger payout than monthly withholding.
In practice the tax is withheld when the payout is made, and Korean interest income is taxed separately rather than added to other income. Closing the plan early usually forfeits the agreed rate, so reaching maturity is the premise of the calculation.
Here interest compounds on the gross balance for the whole term and a single tax is applied to the total interest at maturity. The same 12 deposits of 500,000 at 3.5 % and 15.4 % tax produce 6,097,269, about 160 more than the monthly withholding version — the value of letting the tax money keep earning until the end.
Maturity balance = Σ P(1 + r/12)^(n−m+1) · Tax = (balance − deposits) × tax rateWith a positive interest rate it is usually slightly better because the gross interest compounds, but the gap is small: 161 won on 500,000 per month at 3.5 % over 12 months. Higher rates and longer terms widen it.
Korean interest income is taxed separately and settled by withholding. Once yearly financial income passes 20 million won it moves into global taxation with progressive rates, and it can also affect dependant status for national health insurance.
In Korea banks withhold 15.4 % (14 % income tax plus a 10 % local surcharge) on interest by default. Tax-free and reduced-rate products exist, such as first-home savings accounts and preferential rates for low-income earners, but they must be arranged in advance.
Over one year the difference is marginal. Over ten years at a higher rate, paying the tax early can cost several percent of the final balance, so it is worth running both versions before choosing a product.