In 2014, National Treasury introduced an opportunity for South Africans to invest tax-free. They called it the tax-free savings accounts and in my view, this is the best opportunity for investing rather than saving.
You can open an account with any bank to save in a fixed deposit account, but you will only receive interest (and you already tax-exempt some of the interest). Another way to use the tax-free savings account, or what I refer to as tax-free investing, is by investing on the Johannesburg Stock Exchange.
How does a tax-free savings account work?
- You can invest up to R36 000* a year from the 1 March to 28 February of the following year.
- You do not need to put the total amount all at once, it is up to you what amount you want to put away
- You just cannot exceed R36 000* a year. In your lifetime, there is a limit of R500 000 (which if you started this year would take roughly 14 years to reach).
* the amount has changed over the years, in 2015 it was R30 000. In 2018 it was R33 000 and in 2020, it was increased to R36 000.