Tax on Fixed Deposits

Zed says:
28 May 2015 at 20:25

I am currently saving for a house, so I am investing in a 3 month Fixed Deposit (I want to avoid equity risk for now). I earn approximately 6% pa. What is the limit of Interest Earn that is exempt from tax? If I change the investment term to 1 year, starting 01 June 2015, the investment matures on the 01 June 2016. Do I pay tax on these returns in the 2015 tax year?

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TaxTim TaxTim says:
29 May 2015 at 12:46

You will pay tax as and when you earn it, regardless of receiving it or not, during the tax year. The interest threshold for individuals under 65 years of age is R23 800 before any tax is paid.

Zed says:
29 May 2015 at 18:37

Assume I invest R500k @ 7%. If I invest it on the 1 June 2015, for 3 months, I would earn interest of R8 750 on the 1 Sep 2015. I assume that this will be subject to tax once R23 800 is exceeded in 2015 Tax Year. However, If I invest it on the 1 June 2015, for 1 year, I would earn interest of R35 000 on the 1 June 2016. Given that I only receive these funds after 28 Feb 2016, will I be subject to tax on the R35 000 in the 2015 Tax Year?

TaxTim TaxTim says:
31 May 2015 at 22:21

Tax is paid on income earned and not necessarily received. So you would actually have earned 9 months worth of interest even though you only receive it in June. So you would have earned R26 250 which means that the first R23 800 will not be taxable, but unfortunately the remainder of R2 450 would be for the 2016 tax year.

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