A Fin24 user wants to know how much tax he can expect to pay on his provident fund payout when he retires. He writes:
I received a payout of R11 5000.00 from an umbrella provident fund, the total amount should have been R123 000.00 but they kept back tax of R8 000.00. I had read that one did not have to pay tax on any amounts under R300 000.00. Please could you verify if I am incorrect?
Marc Sevitz of TaxTim responds:
If the withdrawal from a fund was voluntary, that is not due to retirement, retrenchment or death then only the first R25 000 of the lump sum withdrawn is tax free and thereafter the first rate of tax is 18%.
Depending on what contributions were made to the fund, which reduce the actual taxable lump sum, 18% will apply on all amounts over R25 000, but less than R660 000.
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