Written by Vee
Updated 11 May 2026
Updated: SARS confirms the annual TFSA limit is now R46,000 from 1 March 2026. The lifetime limit remains R500,000, unused annual limits do not roll over, and excess contributions are taxed at 40%.
As a nation, South Africa does rather poorly on the savings front. With the majority living near or below the breadline, there’s not much to save when you’re more concerned with just getting through the month.
Our high levels of consumer debt, combined with little in the way of personal savings, means we become financial burdens on the government in the long run. It’s for this reason that tax free savings accounts were introduced in March 2015 as an incentive to encourage household savings.
Since then, financial houses have created quite a buzz around these savings accounts, promoting them through radio, television and online advertising as an accessible savings mechanism.
And since they offer a tax break, this year you’ll see them referenced on your annual tax return (ITR12). So let’s have a closer look at these accounts and what they mean to you, as a taxpayer.
Basically, it’s a type of savings account offered by financial institutions that invests your money in a combination of financial products such as unit trusts, bank savings accounts, fixed deposits, bonds, and other investment products.
The difference between this and other savings or investment accounts is that all returns, including interest, dividends and capital gains, are tax free in your hands.
This means that you’re not liable to pay tax on the growth of your investment, nor when you decide to withdraw from your account.
There’s an annual contribution limit of R46,000 per tax year from 1 March 2026, as well as a lifetime limit of R500,000.
Once you have reached your lifetime contribution limit of R500,000, no further investment in a tax free savings account will be allowed.
The annual limit can be spread across as many tax free savings accounts as you wish, provided you don’t invest more than R46,000 in total for the tax year, which runs from 1 March to the end of February.
For example, if you’ve already contributed R10,000 to one tax free savings account for the period, you’ll only be able to invest a maximum of R36,000 across any others for that same tax year.
The annual limit can’t be carried over to the next tax year. If you contribute less than the limit in a tax year, you simply forfeit any unused amount.
You are then given the annual limit that applies for the following tax year.
For example, if you only invest R36,000 in a tax year, you can’t carry the unused R10,000 over to the next year.
As a parent, you’re able to open a tax free savings account for your child, but you need to be aware that any contributions you make on their behalf count towards their annual and lifetime contribution limits.
The critical advantage of a tax free savings account is that the growth or earnings on the initial investment are exempt from tax.
You’re able to reinvest, or capitalise, your returns and they don’t count towards your annual or lifetime contribution limit.
For example, if you invest R46,000 for the year and receive an investment return of R2,000 that you reinvest, the total amount in the account will be R48,000.
You’ll still be able to invest your full R46,000 the following year because the R2,000 reinvestment doesn’t count towards your annual or lifetime limit.
You’re free to withdraw from your tax free savings account at any time. However, any replacement investment amount is treated as a new contribution and will count towards your annual and lifetime limits.
Let’s say you withdraw R46,000 from your tax free savings account because you’re going through a short-term cashflow issue.
A few months later, in the same tax year, you come into a little money and deposit R46,000 back into your tax free savings account.
Provided you haven’t made any other contributions for the year, this amount takes you to your contribution limit for the year, and it will also be added to your overall lifetime contribution amount.
If you had already made another contribution in that tax year, this repayment could push you over your annual contribution limit.
If you exceed your annual or lifetime limit, SARS imposes a 40% penalty on the excess amount contributed. This will be payable on assessment in the year you exceeded the limit.
For example, if you invest R25,000 in an account with one institution and R25,000 in an account with another institution in the same tax year, you will have contributed R4,000 more than the annual limit of R46,000.
The penalty will therefore be 40% of the excess contribution.
R4,000 x 40% = R1,600 tax penalty.
The financial institution holding your tax free savings account will issue you with a tax certificate called an IT3(s).
This certificate contains the details you need for your tax return, such as your contributions, interest, dividends and other relevant amounts.
The institution also sends this information to SARS, who may pre-populate it onto your ITR12 in the section called Tax Free Investments.
This is where you should see the information from your tax certificate. You must check that the pre-populated information in your tax return agrees with the information on your tax certificate.
Alternatively, you can use TaxTim to help you complete and file your tax return. TaxTim will import your tax free certificate directly from SARS eFiling.
You won’t need to worry about filling in all the fields yourself, because TaxTim guides you through the process with simple questions.
Do Your Tax Return Easily