Good Day, my question relates to the declaration of interest accrued (but not necessarily paid) on Fixed Deposit investments for income tax purposes. I am a provisional tax payer and prefer to pay the tax in the tax year in which the interest is earned. For example, if I start a 24 month fixed deposit on 1st January 2016, maturing 31st December 2017, interest (simple) payable at maturity then is it permissible to declare the interest as follows assuming for simplicity that interest accrues at R100. 00 per day:
Tax year 2016 1. 1. 16 to 29. 2. 16 = 60 days @R100 per day = R6000 Tax year 2017 1. 3. 16 to 28. 2. 17 = 365 days @R100 per day = R36500 Tax year 2018 1. 3. 17 to 31. 12. 17 = 306 days @R100 per day = R30600
If so what documentation should I obtain from my bank to support my income tax returns?
The bank will issue you with an IT3b at the end of each tax year which you use to submit to SARS.
Johnwrsays: 20 February 2016 at 9:24
My problem then is that my bank only issue an IT3b once the interest has actually been paid to me so that in the example which I provided they would only issue one IT3b after the close of the 2018 tax year and the document would show the interest paid at R73100 during that tax year. Meanwhile I would have declared and paid tax on the interest in each of the tax years it was earned as outlined in my example which means that I have a problem explaining that to SARS. If the procedure I outlined is correct then are the bank in fact incorrect in what they are doing and should I insist on IT3b documents being issued for the amount of interest accrued ( but not paid) during each tax year that the investment is in place?
TaxTimsays: 22 February 2016 at 2:06
The IT3b generally shows the amount of interest paid and accrued to you - you would need to declare the interested earned (accrued) which you can work out. However, if the IT3b does not show the accrued amount it is also acceptable to SARS to show what was on the document as your declarable interest.
Get SARS Tax Deadlines in your Inbox
We'll tell you when you need to file, along with tax tips and updates.