How much tax will I pay if I invest in a fixed deposit?

a simple tax calculator

Intro

Here is the bad news. Interest earned on your savings or fixed deposit account is taxable.
Good news. You will only be taxed on interest if your interest earned in any one tax year exceeds R23.8k. This tax exemption increases to R34.5k per annum if you are 65 or older.

The amount of tax you pay on your local interest earned depends on which income tax bracket you fall into. At the end of the tax year, you receive an IT3b statement from your bank detailing how much local interest you have earned. This interest is seen as personal income for tax purposes. Amounts over R23.8k (if younger than 65) or R34.5k (if 65 or older) will be added to your income. The applicable tax bracket will then be used to calculate tax payable.

Here is a quick and easy tax calculator to help you understand how much tax you will be paying.

Inputs

Monthly Income

Pension contributions

Monthly interest earned

Age

My 2022/2023 Tax Statement

	Monthly	Annual
Income / Salary	R20.0k	R240.0k
- pension fund contributions	R2.0k	R24.0k
+ local taxable interest income *	R1.02k	R12.2k
Taxable income	R19.02k	R228.2k
Tax payable	R2.19k	R26.3k
Net income after tax	R18.81k	R225.7k

* Total interest earned for the tax year is R 36,000. However, you qualify for a R23,800 tax exemption. Thus only R12,200 is added to your taxable income.

last updated: April 2022
For more tax related questions, check out howtaxworks.co.za. Also proudly created & maintained by myself, Walter.

You will be paying R26.3k in tax.

For the 2022/2023 tax year, using a monthly income of R 20.0k, pension fund contributions (RAs, pension funds, prov fund) of R 2.0k and local interest earned on your savings and investments of R 3.0k, you will be paying R26.3k in annual tax.

You are effectively paying R3.2k in annual tax on your interest earned.

If no interest was received during the tax year, you would be paying R23.2k in annual taxes. The additional R36,000 local interest makes you liable for a R26.3k tax bill. ie an additional R3.2k is due in taxes due to interest earned. A tax rate of 8.8% is thus applicable on the interest.

Meanwhile, your average tax rate is 10.4%

Your income is R225.7k. As you will be paying R26.3k in personal income tax means your average tax rate is 10.4%.

Here is your tax bracket.

You fall into the following income tax bracket based on the 2022/23 SARS tax rate tables. This also means that your marginal income tax rate is 26.0%. Which means any income (such as bonuses) will - at least - attract this tax rate.

	Taxable Income	Rates of tax
	R1 - R216,200	18.0% of taxable income
👉	R216,201 - R337,800	R38,916 + 26.0% of taxable income above R216,200
	R337,801 - R467,500	R70,532 + 31.0% of taxable income above R337,800
	R467,501 - R613,600	R110,739 + 36.0% of taxable income above R467,500
	R613,601 - R782,200	R163,335 + 39.0% of taxable income above R613,600
	R782,201 - R1,656,600	R229,089 + 41.0% of taxable income above R782,200
	R1,656,601 and above	R587,593 + 45.0% of taxable income above R1,656,600

Note. Whilst you fall into the 26.0% tax bracket, your tax bill is reduced by tax rebates of R15,714.0. Thus you end up with tax payable of R26,322.0.

For more tax related questions, check out howtaxworks.co.za. Also proudly created & maintained by myself, Walter.