What is a Tax-Free Savings Account (TFSA)?
A Tax-Free Savings Account (TFSA) is a special savings account where you NEVER pay tax on the money it earns. No tax on interest. No tax on dividends. No tax on growth. The government created it to encourage South Africans to save. Here is everything you need to know.
Key Takeaways
- All growth inside a TFSA is 100% tax-free
- You can put in up to R36,000 per year
- Lifetime limit is R500,000
- You can withdraw anytime (but cannot put it back if you hit the limit)
- Available at most banks — some start from R500/month
How does a TFSA work?
You open a TFSA at a bank or investment platform. You put money in (up to R36,000 per year). That money gets invested. All the growth — interest, dividends, capital gains — is completely tax-free. Forever. You never pay tax on it.
- Open at any bank or investment platform
- Deposit up to R36,000 per year (R3,000 per month)
- Lifetime maximum: R500,000 total deposits
- All growth is tax-free — no exceptions
- You can withdraw anytime, but the contribution limit does not reset
Why is tax-free growth such a big deal?
In a normal savings account, SARS takes tax on your interest (above R23,800 per year). In a normal investment, you pay tax on dividends (20%) and capital gains (up to 18%). In a TFSA, you pay ZERO on all of this. Over 20-30 years, this adds up to tens or hundreds of thousands of Rand saved.
- Normal interest tax: up to 45% of interest earned
- Normal dividend tax: 20% of dividends
- Normal capital gains tax: up to 18% of profits
- TFSA: 0% on ALL of the above
- Over 20 years, tax-free growth can mean 30-40% more money
Important rules to know
There are some rules you must follow. If you break them, SARS charges a 40% penalty on the excess amount.
- Maximum R36,000 per year (April to March)
- Maximum R500,000 in your lifetime
- If you withdraw and re-deposit, it counts as a NEW contribution
- Example: You put in R36,000, withdraw R10,000, put R10,000 back = you are now R10,000 OVER the limit
- Penalty for going over: 40% tax on the excess amount
- So be careful with withdrawals — only take out what you truly need
Where to open a TFSA
Almost every bank and investment platform in South Africa offers a TFSA. Compare fees and investment options before choosing.
- EasyEquities — low fees, many investment options, app-based
- Allan Gray — well-known, good funds, higher minimums
- Satrix — very low-cost index funds
- FNB / Capitec / Nedbank — convenient if you already bank there
- 10X Investments — low fees, simple options
- Look for LOW FEES — even 1% less in fees means thousands more over time
Ready to see your own numbers?
Use the TFSA Growth Calculator