A TFSA (Tax-Free Savings Account) is a SARS-registered account at a bank, asset manager, or brokerage in which all investment returns — interest, dividends (including foreign), and capital gains — are 100% tax-free. There’s no tax on growth, no tax on withdrawal, no tax ever.
Contribution limits are tight: R46,000 per tax year and R500,000 over a lifetime. Over-contributing triggers a punitive 40% penalty tax on the excess. Withdrawn amounts can’t be re-contributed without using up fresh allowance — the lifetime cap counts gross contributions, not balance.
TFSAs can hold cash, fixed deposits, unit trusts, ETFs, REITs, or shares. Performance fees on the underlying investment are not deductible (since there’s no tax to deduct from). Each adult and child has their own R500,000 cap, so a family can shelter substantially more in aggregate.