What is Taxable Income?
Definition
Taxable income is the portion of total income on which income tax is calculated, after subtracting all allowable deductions and exemptions as defined by SARS.
Explained Simply
Taxable income is calculated as: Gross Income - Exempt Income - Allowable Deductions = Taxable Income. Allowable deductions include retirement fund contributions (up to 27.5%), travel expenses, home office expenses, and wear and tear on business assets. Certain income is exempt, such as the first R23,800 of local interest (under 65) and up to R1.25 million of foreign employment income. The taxable income figure determines which tax bracket you fall into.
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Related Terms
Income Tax
Income tax is a direct tax levied by SARS on the taxable income of individuals, companies, and trusts in South Africa, using a progressive rate system for individuals.
PAYE (Pay As You Earn)
PAYE is the system through which employers deduct income tax from employees' salaries and pay it directly to SARS on their behalf each month.
Provisional Tax
Provisional tax is a method of paying income tax in advance, in two or three instalments during the tax year, rather than as a lump sum at year-end.
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