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