Tax on local interest after the age-based annual exemption.
Tax on interest
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Exemption used
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Taxable interest
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How SARS taxes the interest on your savings
South Africa does not have a separate flat tax on interest the way some countries do. Local interest is added to your other taxable income and taxed at your marginal rate, but with one generous shield in front of it: an annual interest exemption. Below that line, interest is tax free. Above it, the excess joins your salary, rental, and business income and is taxed at whatever bracket your top rand falls into. That structure is the key to understanding why two people with identical interest can owe wildly different tax: it depends entirely on how much other income they already earn.
The exemption is age based. The amounts this calculator applies are R23,800 a year if you are under 65 and R34,500 a year from age 65, larger for older savers because their tax thresholds are higher overall. These are the figures modelled here, and you should confirm the current amounts with SARS, since they can be adjusted in the Budget.
R40,000 of interest on a R450,000 salary
Picture a saver under 65 with R450,000 of other taxable income who earns R40,000 of local interest in the year. The first R23,800 is exempt, leaving R16,200 of taxable interest. The tool stacks that R16,200 on top of the R450,000 and measures the extra tax, which is the difference between the SARS tax on R466,200 and the tax on R450,000. At this income level the top rand sits in the 31 percent band, so the R16,200 is taxed at 31 percent, giving R5,022 of tax on the interest.
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The chart splits total interest into the exempt portion and the taxable portion.
Tax-free savings accounts beat the exemption for long-term money
The interest exemption is a fixed annual amount, so as rates climb or your balance grows, you breach it. A tax-free savings account works differently and better for money you can leave alone. Interest, dividends, and capital gains inside a TFSA are fully exempt and never touch this allowance, with no annual ceiling on how much interest it can shelter, only a limit on contributions, currently R36,000 a year and R500,000 over your lifetime under the rules this site models. A sensible order of operations is to fill your TFSA first, then rely on the interest exemption for cash you keep accessible, and only after both are exhausted does interest start attracting tax at your marginal rate.
One trap catches people every year. Foreign interest does not get this exemption at all, so interest from an offshore account is fully taxable from the first rand. And interest paid to a South African by a local bank is reported to SARS on an IT3(b) certificate, so it is visible whether or not you declare it. Always include it on your return.
Does the interest exemption apply to a fixed deposit?
Yes. The annual exemption covers interest from local sources broadly, including fixed deposits, notice accounts, money market funds, and savings accounts at South African banks. Add all your local interest together for the year and the single age-based exemption applies to the total, not to each account separately.
Is interest inside a retirement annuity taxed?
Not while it stays in the fund. Interest, dividends, and growth earned inside a retirement annuity or pension fund roll up tax free, and this interest exemption is irrelevant there. Tax only arises later, on the income or lump sum you draw in retirement, under separate rules.
What if my interest is below the exemption?
Then you owe no tax on it, and the calculator shows zero. You should still declare the interest on your tax return, because SARS receives the bank certificate regardless, and accurate disclosure keeps your assessment clean even when the tax is nil.