Section 11F deductions

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Section 11F of the Income Tax Act No 58 of 1962 (“the Act”) allows taxpayers to deduct pension, provident and retirement annuity fund contributions from their taxable income. The deduction allowed in the year of assessment must not exceed:

  • the maximum allowed deduction of R350,000
  • 27,5% of your remuneration or taxable income (excluding retirement lump sum benefit/withdrawal, and severance benefit), and including any taxable capital gain

Any contributions made by a taxpayer over the maximum allowed deductions can be deducted in future years of assessment. The excess amount (i.e., the balance carried forward from the previous year), is in the first instance added to the current year contributions made by the taxpayer and then becomes subject to the limitation mentioned above.

Irrespective of the deduction it’s important to know that you will eventually pay tax when the funds are paid out. The tax payable on pension or provident funds will be determined by the lump sum tax table, while the tax payable on retirement annuities will be determined by your personal income tax table.

Tax Tuesday

Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts at AJM Tax share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday.