A Tax-Free Savings Account (TFSA) allows South African investors to contribute up to R46,000 annually, with a lifetime contribution limit of R500,000. The main advantage of a TFSA is that all income - whether interest, capital gains, or dividends—is completely tax-exempt. This means your investments grow without the usual tax deductions that typically lower returns. Provided that you stay below the R46,000 limit, you are free to make contributions whenever it suits you best. For instance, you could put away R3,833 each month or you could make a once-off deposit each year.
Although you can withdraw from your TFSA, it’s preferable not to do so. The lifetime-contribution limit means that you can’t top up your account after withdrawing from it.
If you go over the annual or lifetime threshold, the amount by which you’ve exceeded the limit will be taxed at 40%. The South African Revenue Service’s (SARS) tax year runs from 1 March to 28 February each year, so it’s best to ensure that you don’t invest more than R46,000 during this period to avoid penalties.
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