Consumer 1 – Receiver of Revenue 0
A tax free savings account sounds too good to be true? And… the adviser blogging this earns absolutely nothing!!
“The first bout of tax-free savings accounts were launched in the first quarter of 2015, when an amendment to the Income Tax Act came into effect on March 1 2015.”
In laymens terms, these investment’s and their returns are not taxable!
Why did Government make the changes?
“TO ENCOURAGE SAVING”
So just what are the BENEFITS and why should you have one?
- An individual can invest up to R30 000 in their current tax year (1 March to end February).
- You pay no tax on your investment growth or when you take your money out.
- You pay no tax on dividends, capital gains or interest.
- Various funds/investment schemes can be chosen
- You can withdraw your money from the investment at any time.
For illustration purposes, here is an example of what your tax free savings could be worth in 10 years from now:
*You invest R2500 per month, (increased annually to be in line with inflation, and in line with maximum annual tax free limit) could be worth: R 581 213 tax free
*shown for illustration purposes only.
In essence, tax-free savings accounts are savings products on which no income tax, capital gains tax or dividend withholdings tax will be charged. Most unit trusts, exchange traded funds (ETF),fixed deposits and savings accounts and RSA Retail Savings Bonds are be classified as Tax free savings accounts..
Stay tuned for my next blog on retirement saving and can you retire at 65 or not..