Fees & Taxes

What Fees and Taxes are applicable for Fixed Deposit investments?

Fees

No Monthly or Admin Costs Apply πŸ€— - Great news! Neither monthly nor admin fees are charged by any of the banks which we have investigatedon this site. It is always a good idea to read the terms & conditions of a fixed deposit agreement before you invest. There should be a Fees section in most agreements.

Taxes

You can't run from the tax man 🦢🦢 . Interest earned from Fixed deposit investment is taxable.

Interest Exemptions

There is some good news though. To encourage savings, SARS provides interest exemptions. For the 2020 tax year, the following interest exemptions apply:

AgeExemption
Individuals under 65R 23 800 per annum
Individuals 65 and overR 34 500 per annum

These exemption levels have remained unchanged for a number of years.

To surpass these exemption levels, you will have to invest +/- R 300 000 (*) - if younger than 65 - or R430 000 (*) - if 65 or older - to pay any tax on your interest. Remember, even in that case only the income above the interest exemption is liable for tax.

Example Lets say you invested R500 000 in a fixed deposit at a fixed rate of 8%. The total interest earned over the year was R 40 000.

If you are under 65 you qualify for a R23 800 exemption. So only R16 200 would be subject to income tax. If you are over 65 only R 5 500 would be deemed taxable at your marginal income tax rate.

(*) - assuming you are achieving fixed deposit rates at about 8%.

Accrued Income vs Paid Income - Taxable?

Lets assume you have invested in a two year fixed deposit with interest paid out only at maturity. Do you have to declare the interest earned (or accrued) but not yet paid to SARS?

The answer is yes, but... interest accrued should be declared to SARS. So even if you only get your interest payment at term maturity, the interest you earned - or accrued - in your account should be declared. Here is the BUT. The banks will issue you with an IT3b at the end of each tax year. Accrued interest should generally fall part of this notice & declarable interest. If it does not, SARS will accept the amount shown in the IT3b as declarable interest. Alternatively, you can work the accrued amount out on your own & declare it as part of the Local Interest to SARS. Both practices are acceptable to SARS.