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What is a Tax-Free Investment?

The Tax-Free Investment is an opportunity for investors to gain full benefit of their capital
plus profit earned which is not subjected to any tax implications.

Who should invest in a Tax-Free Investment?

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Children*

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Students*

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Professionals* / Business people*

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Homemakers*

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Pensioners* / Retirees*

*With the primary requirement being a South African permanent resident.

Why Should I Consider a Tax-Free Investment with Al Baraka Bank?

Shariah Compliant
Shariah Compliant
Shariah Compliant
Shariah compliant / permissible returns on investment.
Monthly Profits
Monthly Profits
Monthly Profits
Profits will be capitalised into your Tax-Free Investment account at the beginning of every month without affecting your contribution limit.
Secure Investments
Secure Investments
Secure Investments
Secure investments that are socially responsible.
Consistent Returns
Consistent Returns
Consistent Returns
Long history of providing consistent returns with Shariah investments.

How it Works?

Based on the following assumptions:

Maximum Monthly Debit Order amount: R 2 750
Limit per tax year: R 33 000
Assumed rate of return : 5.5% p.a.
Investment period: 36 years

A 24-year-old investor opens a Tax-Free Investment account with Al Baraka Bank with a debit order for the maximum amount of R 2 750 per month.

At the age of 40, the investor would have invested the maximum lifetime contribution R 500 000.

If the investor capitalises his profit, upon his retirement at the age of 60, the investment would pay out a profit of R 2 100 000, calculated at an indicative investment return of 5.5% p.a.

Depending on the investor’s tax bracket, the tax saving estimate would be between R240 000 and R600 000.

This example and the values presented are not guaranteed and are for illustrative purposes only. The current nominal profit return of 5.5% p.a. was used to determine this calculation

Lifetime contribution: R500 000
These are the total payments made into a tax-free investment account.

Effective rate of return: 11% (5.5% p.a compounded monthly)
The effective rate of return on the investment is calculated over the investment lifetime: Investment Profit Pay-out / Lifetime Contribution / Number of years in the investment

Investment profit: R2 100 000
This is the profit the investment would yield after 36 years at an effective return of 11% p.a.

Investment return (Capital + Investment Profit): R2 600 000
This is the investment return after 36 years at an effective return of 11% p.a.

Tax saving: R600 000
This is the maximum tax saving on the investment return at a tax rate of 45% at the time of withdrawal.
(Minimum tax saving of R240 000 at a tax rate of 18%)

Frequently Asked Questions

Minimum of R1000 when opening the account. Thereafter, minimum deposits of R250 – but must not exceed R33 000 per tax year.

**There is a R33 000 contribution per tax year and a R500 000 lifetime contribution limit.

The penalty for exceeding these contribution limits is a 40% tax on the amount that is in excess of the limit.

You will be allowed a maximum of one withdrawal per tax year with a minimum withdrawal amount of R500 and maximum withdrawal amount being the total value of your investment.

**Annual and lifetime contribution limits are subjected to amendments by Legislation from time to time

  • Bar-coded identity document or smart card ID
  • A utility bill, not older than three months, for the verification of residential address in line with FICA requirements

All deposits and withdrawals will be subject to ABL's banking fees.

Islamic investments earn a return based on a profit sharing model. Any income earned through the bank's financing operations are then shared between the shareholders and the bank's depositors. As the income earned by the bank varies week on week, so too would the rate offered on the product.

The returns on the product are marginally different to those of other banking institutions, based on the Shariah-compliance cost involved in offering an Islamic alternative to conventional banks.

Profit rates are revised weekly, based on the profit earned through the bank's financing operations during the preceding week. Profit rates, even though revised weekly, are relatively stable.

Yes, it is possible to have more than one tax-free investment or savings account at different financial institutions. However, at Al Baraka Bank, we only allow one tax-free account per individual. It is important to note that the annual and lifetime contribution limits across any number of tax-free savings accounts with any number of institutions collectively may not exceed their respective contribution limits.

Tax-Free Investment AdvantagesTax-Free Investment Limitations
Invest from as little as R250Only Allowed a Maximum of R33 000 per Tax year
Shariah Compliant returns on your investmentPenalised if you exceed your Annual Contribution Limit
No Tax on Investment IncomeDoes not replace retirement annuity
No Monthly feesProfits paid upon maturity of investment

Kindly note that penalties are applicable for investments that are made which are in excess of the annual and lifetime contribution limits.

Kindly familiarise yourself with all terms and conditions and legal requirements pertaining to the Tax-Free Investment as noted in the regulations in terms of Section 12T of the Income Tax Act of 1962, on the requirements for Tax-Free Investment

For more information please click here.

Invest Today

0860 225 786 | info@albaraka.co.za

Think Tomorrow.
Think Tax-Free.

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