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It is a tax-free investment which the South African Revenue Services(SARS) introduced form 15 March 2015 as a tool to encourage household savings as people will not be taxed from this account.
This tax-free saving account is an investment where you will get the full investment return without being taxed on any money you have earned.
Tax free savings account
Saving in a tax-free savings account will generate more money for you compared to other savings accounts that are available out there.
You can withdraw money from your investment anytime you want. However, this option will definitely prevent you from reaching your target.
WHY SAVE IN A TAX-FREE ACCOUNT?
Your contributions to this amazing tax-free saving account are made from your post-tax income, meaning after you have already paid tax from your income.
An individual cannot be taxed on his/her withdrawals.
The longer you invest, the more benefit you will get.
The effect of compound interest investment is increased in a tax-free savings account due to the tax relief on the investment return.
BENEFITS OF SAVING IN A TAX-FREE SAVINGS ACCOUNT
National Treasury has put a limit on the amount of money you can save on the tax-free savings account.
Total contributions for a year should not exceed the prescribed annual contribution set to be R33 000 per year. The amount used to be R30 000 but was increased to R33 000 as of 1 March 2017.
HOW MUCH CAN I SAVE IN A TAX-FREE ACCOUNT?
No, you cannot open a tax-free savings account for a family or a company as it is designed for individuals.
CAN I OPEN A TAX-FREE SAVINGS ACCOUNT FOR A FAMILY TRUST OR A COMPANY?
Yes, you can apply for a tax-free investment on behalf of your child or other family member.
Reporting that needs to be done for my tax-free account
It is compulsory to include and disclose the investment information when submitting your annual tax return. You will need to submit the IT3(s) statements provided to you by SARS when you need them.
CAN I OPEN A TAX-FREE SAVINGS ACCOUNT FOR SOMEONE ELSE?
The tax year in South Africa runs for 1 March to 28 February, so a person can make contributions during that time.
WHEN IS THE TAX PERIOD DURING WHICH CONTRIBUTIONS CAN BE MADE ON A TAX-FREE SAVINGS ACCOUNT?