This calculator helps you determine:

  • Your allowed investment amount based on annual and lifetime limits.
  • Any penalty (40%) for exceeding SARS limits.
  • Your final investment balance after growth.

By entering your investment year, contribution amount, and lifetime investment so far, you can quickly see how much you can invest without penalties.

As per the income tax Act current guidelines, here are some things to consider.

  • You will not pay any income tax, capital gain tax, or dividend tax on investment returns.
  • You are limited to an annual limit and lifetime alike.
  • Tax-free investment accounts cannot be used as transactional accounts.
  • You cannot make debit orders or ATM transactions with these accounts.

Tax-Free Investment Limits & Contributions

According to the SARS Act, tax-free investment accounts have annual and lifetime limits to ensure compliance with tax regulations. Investors can hold multiple tax-free accounts, but total contributions must not exceed the set annual and lifetime limits.

The annual limit determines how much an individual can invest in a single tax year, while the lifetime limit ensures that total investments remain within SARS guidelines. If an investor exceeds the annual limit, a 40% penalty tax applies to the excess amount. Here is the breakdown of it.

Years of Assessment

Annual Limits

Lifetime Contributions

2024

R36,000

R33,000

2023

R36,000

R33,000

2022

R36,000

R36,000

2021

R33,000

R36,000

2020

R33,000

R36,00

2019

R33,000

R36,00

Investment returns may exceed annual and lifetime limits without affecting them. For example, if someone invests R36,000 in 2021 and earns R5,000, the total becomes R41,000, but the R5,000 return isn’t a contribution. However, withdrawing and reinvesting it counts as a new contribution, affecting both limits, the same as reinvesting the original capital.

What Should I Do Next?

Service providers across the country offer different monthly and yearly plans for tax-free investments. You may enquire from your selected provider. According to SARS guidelines, they will offer the following information.

  • Total contributions per annual tax.
  • Total amounts withdrawn per annual tax.
  • The total amount transferred per annual tax.
  • Total returns on investments, including capital gains, capital losses, interests, and dividends.

You will also receive this information through an IT3 tax-free investment certificate per year from the service provider.

FAQs

No, there is no limit on the number of tax-free investment accounts. All you need to make sure is that you do not invest more than the annual limitations categorized by SARS.

Yes, of course. Parents can open a tax-free savings account for their minor children. However, it is important to consider the contributions you make on their behalf, considering the annual and lifetime contribution limits.

If you exceed the contribution limits, SARS will put a penalty on the excess amount. Later, you will need to pay this amount after the assessment of that specific year.

In essence, it is an excellent idea to invest through the South African government-authorized tax-free investment accounts, without paying any excessive duty. I hope this guide has helped you determine the contributions and return on investment.