Tax calculations

[Magandroid]

Could someone please explain to me how tax would be calculated if I deposit money into a fixed account for about 2 years. The amount would be quite substantial as i would just be parking it there until i have saved up enough.

 

[AchmatK]

You would get an IT3b interest certificate from the bank. You put this amount on your tax return under interest income. If you're under 65yrs, the first R23 800 of interest income is exempt from income tax(R34 500 for persons over 65yrs). The amount over the exemption is added to your total taxable income and taxed at your marginal rate.

 

[SauRoNZA]

Could someone please explain to me how tax would be calculated if I deposit money into a fixed account for about 2 years. The amount would be quite substantial as i would just be parking it there until i have saved up enough.

Depends where the money is coming from.

If it's your own money and it's already been taxed you would only pay tax towards the interest that goes over the exemption above.

If it's someone else's money...well then that's a whole different kettle of fish.

 

[Magandroid]

Thanks for the responses guys. Yes the funds are my own and it's money that i have been saving. So if i understand this correctly then it's as follows. If hyperthetically, I deposit funds into a fixed deposit account for 2 years and the interest i earn would be say R40000 per year, the first R23800 is excempt and i only get taxed on the remaining R16200. This R16200 is then added to my annual income and then taxed? Am i taxed annually or only after the maturity date of the fixed deposit which is 2 years?

 

[Dean01]

Thanks for the responses guys. Yes the funds are my own and it's money that i have been saving. So if i understand this correctly then it's as follows. If hyperthetically, I deposit funds into a fixed deposit account for 2 years and the interest i earn would be say R40000 per year, the first R23800 is excempt and i only get taxed on the remaining R16200. This R16200 is then added to my annual income and then taxed? Am i taxed annually or only after the maturity date of the fixed deposit which is 2 years?

You are taxed based on earlier receipt or accrual of the interest.

 

[AchmatK]

The tax is paid annually on assessment after you submit your tax return. If you have other tax deductible expenses such as medical aid or retirement annuities, this can offset your tax liability.