when an individual deposits money in their bank account the bank pays interest on the funds to the account holder in compensation for the deposit this is because the deposit is used to lend money to other individual and corporate borrowers generating income for the bank the interest paid to the account holder may be deposited in the entity s account monthly quarterly or annually depending on the financial institution or type of account 
the interest is simply referred to as gross interest because it does not factor in taxes which also impacts the interest earnings for example if you have 3 000 in a savings account that earns 2 interest paid on a yearly basis the quoted 2 is the gross interest so the bank would pay you 60 at the end of the year however the gross interest does not take into account other items such as taxes fees and other charges that may apply to the investment or account after these costs are taken into account and deducted from the gross interest earned the account holder actually walks away with less following from our example above if the annual fee on the savings account is 5 and you were taxed 35 taxes due would be 21 calculated by multiplying 60 by 35 and the net interest earned would be calculated as 60 21 5 34 or 1 13 which is less than the 2 gross interest gross interest is always higher than net interest gross interest and bondsgross interest is simply the pure interest amount paid by a debtor to a creditor for bonds the quoted interest income bondholders receive from their investment represents gross interest assume for example that a bond investor purchases a 1 000 par value corporate bond with a coupon rate of 3 payable annually and a maturity date of five years the bond issuer will periodically pay the bondholder a fixed interest of 3 x 1 000 30 for the duration of the bond s life the fixed coupon rate is the gross interest however at the end of the year the interest earned on the corporate bond will be taxed by the government therefore the bondholder s effective net yield on the investment will be less than 3 the net interest is calculated from the gross interest after other fees and costs are deducted remember the yield represents total investment earnings including interest payments gross yield shows this return without the deduction of expenses like taxes and commission fees 