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How to calculate provident fund deductions for 2016/2017?

Posted 11 March 2016 under Tax Questions


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Ads says:
10 March 2016 at 11:34

Please can you show an example of how the employer and employee's provident fund will affect the monthly tax 2016/2017. I still do salaries manually.

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TaxTimTaxTim says:
11 March 2016 at 10:00

For example, lets say your taxable income (which includes salary, rental income, freelance income, etc.) is R10,000 per month and you contribute R1,000 to an RA and R600 to a provident fund each month.

This means your total retirement contributions for the year are:
(R1,000 x 12) (R600 x 12)
= R12,000 R7,200
= R19,200

Your annual taxable income, before deductions, is R120,000 (R10,000 x 12 months).
This means you can claim a tax deduction of up to R33,000 (27,5% of R120,000). You're limited to the total of your actual contributions though, so in this case the amount of R19,200 can be deducted from your taxable income for the year.

Taxable income = R120,000
Retirement fund deduction allowed = R19,200
R120,000 - R19,200 = R100,800
So your annual taxable income, after deductions, is R100,800. This will be the amount used to calculate your tax and not R120,000.


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