Tax free savings accounts allow you to save your money and earn interest on it without paying tax. Interest on investments is treated as regular income and is taxed. Tax-free savings accounts allow you to deposit a maximum of R36 000 in a year and R500 000 in the lifetime of the investment.
This means you can earn interest on half a million Rands and not pay a single cent in tax. However, if you decide to deposit an amount of money that is more than the limit then you will have to pay 40% in tax. Daily Income compared the interest that you would earn on a R100 000 balance from all the major South African banks.
Here are the best tax-free savings accounts in South Africa. These are tax-free savings account with the highest interest in South Africa.
1. African Bank
African Bank is really unbeatable when it comes interest rates. They have the highest interest rates on fixed deposits, savings accounts and tax-free savings accounts.
Interest rate: 6.75%.
Minimum deposit: R50.
2. Capitec Bank
Capitec Bank offers one of the best interest rates for a tax-free savings account but not a normal savings account.
Interest rate: 5.12%.
Minimum deposit: R1.
3. FNB
FNB offers is usually generous with interests, especially on a fixed deposit account.
Interest rate: 3.90%.
Minimum deposit: R1 000.
4. Standard Bank
The interest rate at Standard Bank is capped at 3.50% and doesn’t get any higher if you have a big balance.
Interest rate: 3.50%
Minimum deposit: R250.
5. Nedbank
You can get an interest rate of up to 3.50% from Nedbank if you have a balance that is over R250 000. However, for people with R100 000, the interest rate drops to 3.25%.
Interest rate: 3.25%.
Minimum deposit: R100.
6. Absa
Absa offers an interest rate of 3.10% for R100 000 but the rate goes up to 4% for amounts that are more than R250 000.
Interest rate: 3.10%.
Minimum deposit: R0.01.
Inflation
It’s always important to choose an interest rate that beats the inflation. Inflation is currently around 4% in South Africa, the only two banks that offer an inflation beating rate are African Bank and Capitec Bank.
Conclusion
These are the best tax-free savings accounts in South Africa. They were ranked based on what interest you would earn with a balance of R100 000. This ranking could easily change if we look at how much interest you earn with R500 000 or R10 000. Do you have any thoughts or questions? Comment below.
