A tax-free savings account (TFSA) is a South African investment arrangement that allows qualifying investment returns to accumulate free of South African income tax, dividends tax and capital gains tax. Despite its name, a TFSA need not be a cash savings account. Depending on the provider, it can hold qualifying unit trusts, exchange-traded funds (ETFs), fixed deposits or other approved investments.
TFSAs are intended for individuals, including minor children. Trusts and companies cannot open them. Parents can invest on behalf of a child, but the contributions use the child’s own allowances.
How much can I contribute?
For the 2026/27 tax year (1 March 2026 to 28 February 2027), the limits are:
- R46,000 per tax year across all your TFSAs combined; and
- R500,000 over your lifetime across all your TFSAs combined.
The limits apply to contributions, not the investment’s market value. You may hold more than one TFSA, but this does not increase your allowances. Unused annual allowance cannot be carried forward, and contributions are not tax-deductible. SARS imposes a 40% tax on excess contributions above the applicable annual or lifetime limit. Check the latest limits on the SARS Tax Free Investments page.
Do investment returns count towards these limits?
No. For example, if you contributed R150,000 over several years and your TFSA grew to R210,000, the R60,000 growth would not use additional contribution allowance. Returns retained or reinvested inside the TFSA remain part of the tax-free investment.
Switching between eligible investments within the same TFSA, where the provider permits it, does not count as a new contribution. However, withdrawing money does not restore contribution allowance already used. If you take money out and later pay it back, that deposit is a new contribution, even if it represents interest or investment growth previously earned in the account.
A properly arranged transfer directly between TFSA providers is different and does not itself use additional contribution allowance.
Is a TFSA suitable for everyone?
The tax advantage can make a TFSA useful for building long-term wealth, but it does not eliminate investment risk, fees or the possibility of losses. Cash may be appropriate for shorter-term needs or investors who cannot tolerate market losses. Diversified growth investments may suit longer-term objectives, provided the investor can accept fluctuations in value.
A TFSA should therefore be considered alongside your investment horizon, emergency reserves, retirement savings and wider financial circumstances. Wealth and Legacy Group can assist with reviewing how tax-free investments fit into your broader investment strategy. Learn more about our investment advice and management services.
See also: Can I transfer my tax-free savings account to another provider? | What should I invest in within a tax-free savings account?
Disclaimer: The information provided here is intended as general guidance only and does not constitute legal, tax, or financial advice. Every situation is unique, and legislation is subject to change. We invite you to reach out to our team at Wealth and Legacy Group for guidance tailored to your specific circumstances.