How Is Interest Income Taxed in South Africa

Interest you earn from South African sources is taxed, but only above an annual exemption. Under section 10(1)(i) of the Income Tax Act, the first R23,800 of local interest is exempt each year if you are under 65, and the first R34,500 is exempt if you are 65 or older. Anything above that exemption is added to your taxable income and taxed at your marginal rate.

That is the whole shape of it. Below the threshold, your local interest costs you nothing in tax. Above it, only the excess is taxed, and at the rate that applies to your top slice of income.

The local-interest exemption under s10(1)(i)

The exemption applies per person, per year of assessment, and it covers interest from South African sources: bank savings accounts, fixed deposits, money market funds, and similar local instruments.

Your age	Annual local-interest exemption
Under 65	R23,800
65 and older	R34,500

The figures above are for the 2026 year of assessment. SARS has kept them unchanged across several years, but always confirm the current amount before you file.

A point that catches people out: this exemption is for interest from South African sources only. Foreign interest, for example from an offshore bank account or a foreign bond, does not qualify. It is fully taxable from the first rand, with no exemption applied.

This is not a tax-free savings account

The interest exemption and a tax-free savings account (TFSA) are two separate things. The exemption is an automatic allowance applied to ordinary local interest. A TFSA is a specific product with its own annual and lifetime contribution limits, where the returns inside it are tax-free. You can use both, but they are not the same mechanism, and the exemption does not increase because you hold a TFSA.

How interest above the exemption is taxed

Interest above your exemption is not taxed at a separate, flat rate. It is added to the rest of your taxable income, and the combined total is run through the normal individual tax table. In practice this means the extra interest is taxed at your marginal rate: the rate on the highest bracket your income reaches.

The 2026 individual tax table is below.

Taxable income	Tax
R1 – R237,100	18% of taxable income
R237,101 – R370,500	R42,678 + 26% of the amount above R237,100
R370,501 – R512,800	R77,362 + 31% of the amount above R370,500
R512,801 – R673,000	R121,475 + 36% of the amount above R512,800
R673,001 – R857,900	R179,147 + 39% of the amount above R673,000
R857,901 – R1,817,000	R251,258 + 41% of the amount above R857,900
R1,817,001 and above	R644,489 + 45% of the amount above R1,817,000

After the table, SARS subtracts the rebates you qualify for: a primary rebate of R17,235 for everyone, a secondary rebate of R9,444 added if you are 65 to 74, and a tertiary rebate of R3,145 added if you are 75 or older.

A worked example

Take an under-65 taxpayer whose salary gives them a taxable income of R450,000. During the year they also earn R40,000 of local interest.

First, apply the exemption to the interest:

R40,000 − R23,800 = R16,200

So R16,200 of interest is added to taxable income; the other R23,800 is exempt.

Their salary already places them in the R370,501 – R512,800 bracket, where the marginal rate is 31%. The R16,200 of taxable interest sits on top of that income, so it is taxed at 31%:

R16,200 × 31% = R5,022

The extra tax on the interest is R5,022. The exempt R23,800 carries no tax at all.

If the same person were 65 or older, the first R34,500 of interest would be exempt instead, leaving only R5,500 taxable.

Do you need to declare it?

Yes. Local interest is declared on your return whether or not it exceeds the exemption, and your bank reports it to SARS on an IT3(b) certificate. If the only reason you owe tax is interest above the exemption, that can be enough to require a return. See our guide on whether you need to submit a tax return for the wider rules, and our income tax calculator to estimate the effect on your total bill.