Calculate after-tax returns on an Israeli savings account (Pikadon or Tashlum) in 2025. Gross interest is taxed at 25%. See net interest, tax, and effective annual yield.
Enter your deposit amount, annual interest rate, and term to calculate gross interest, 25% withholding tax, and net after-tax returns on an Israeli savings account.
Net after-tax interest
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Gross interest
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Tax on interest (25 percent)
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Net interest
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Effective annual yield after tax
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Your breakdown
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How interest tax works on Israeli savings accounts
Israeli banks apply 25% withholding tax to all interest credited on deposit accounts, time deposits, and savings products. The gross interest is calculated based on the nominal rate and term. The bank then deducts 25% before crediting the net amount. For example, a 50,000 ILS deposit at 3.5% annual rate for 12 months earns 1,750 ILS gross. After 25% tax of 437.50 ILS, the net credit is 1,312.50 ILS. The effective annual yield after tax is 2.625%, which is simply 75% of the nominal rate (100 minus 25 percent). No additional tax return is required for most individual depositors since the withholding is final.
Comparing nominal rate to effective after-tax yield
Because 25% of the gross interest is always withheld, the after-tax yield is always 75% of the nominal rate. A 4% nominal rate yields 3% net. A 5% nominal rate yields 3.75% net. This means comparing bank rates on a gross basis is straightforward: the bank offering the highest gross rate also offers the highest net rate. The only exception is inflation-linked (Tzamud) deposits where the tax basis is calculated differently. For nominal deposits, multiplying the gross rate by 0.75 always gives the effective after-tax yield.
Exemptions and special cases
Certain depositors may qualify for reduced or zero withholding. Israeli residents over the retirement age (67 for men, 65 for women) who receive an Old Age Allowance may qualify for a tax exemption on interest income up to a threshold. New immigrants (Olim Hadashim) have certain exemptions during their first years in Israel. Non-residents are subject to different rates depending on their country of residence and applicable tax treaties. For these cases, inform your bank at the time of opening the deposit so the correct withholding rate is applied. This calculator applies the standard 25% rate for a general resident depositor.
Frequently asked questions
What tax rate applies to interest income on Israeli savings accounts?
Interest income on Israeli bank deposits, savings accounts, and most fixed-income instruments is subject to a 25% withholding tax (Mos Nikhui) deducted at source by the bank. This applies to Pikadon (deposit accounts), Tashlum (installment deposits), and similar products. The bank deducts the tax before crediting the net interest to the account. No further income tax is generally owed on this interest for most individual depositors, since the 25% withholding is a final tax on interest income. Exemptions exist for certain inflation-linked bonds and for individuals over retirement age who meet income thresholds.
What is a Pikadon in Israel?
A Pikadon (plural: Pikadonot) is a time deposit or savings account at an Israeli bank. The depositor places funds for a fixed period (from a few days to several years) and earns interest at a predetermined rate. Unlike a current account (Cheshbon Oved), a Pikadon is specifically designed for savings and typically earns higher interest than a standard account. Interest rates on Pikadonot track the Bank of Israel policy rate. In periods of higher Bank of Israel rates (such as 2023-2025), Pikadon rates rose to 4% to 5% annually, making them attractive compared to recent historical lows.
Is Pikadon interest protected from inflation in Israel?
Standard (nominal) Pikadonot pay a fixed nominal interest rate with no inflation protection. Israel also offers CPI-linked (Tzamud) deposits where both principal and interest are adjusted for inflation. On a linked deposit, the tax is applied to the real (inflation-adjusted) gain, not the nominal gain, providing a form of inflation protection. This calculator covers nominal deposits only. For CPI-linked products, consult your bank for the specific tax treatment, as the indexation factor adds complexity to the after-tax return calculation.
Can I get a higher rate by locking my Pikadon for longer?
Generally yes. Banks offer higher rates for longer fixed terms because they gain more certainty about the deposit duration. Typical Israeli bank Pikadon terms range from 7 days to 5 years, with rates stepping up as the term lengthens. Early withdrawal typically forfeits accrued interest or incurs a penalty. The Bank of Israel prime rate (currently above 4% as of 2025) forms the floor for Pikadon rates. Competition between banks means rates can vary significantly, and comparing offers from Leumi, Hapoalim, Discount, Mizrahi, and online banks like Pepper is worthwhile for savers.