The South African Revenue Service (SARS) lets taxpayers deduct contributions to a retirement annuity, pension or provident fund from taxable income, up to a limit. The rule sits in section 11F of the Income Tax Act.
How much can you deduct?
SARS says contributions are deductible at 27.5% of the greater of your remuneration or your taxable income, up to an annual cap of R430,000 for 2026/27. The cap rose from R350,000, which SARS described as the first adjustment since 2016. SARS published the figure in its Budget 2026 answers, which it said are subject to Parliament’s legislative process.
The limits apply to the total of all your contributions to pension, provident and retirement annuity funds.
SARS defines the base in its section 11F guidance. Retirement and withdrawal lump sums and severance benefits do not count in the base. Taxable income is measured before the retirement deduction and before donations to approved charities.
What is the third limit?
The deduction also cannot exceed your taxable income before any taxable capital gain. SARS lists this as the third test in the formula: you get the lowest of the cap, the 27.5% figure and that taxable income.
Source: Rand Desk calculation from the SARS Budget 2026 FAQ: 27.5% of income, capped at R430,000. Assumes income is the greater of remuneration or taxable income. Chart: Rand Desk
Where does the cap start to matter?
At 27.5%, the cap is reached at income of R1,563,636. Below that, the percentage decides the limit, as the chart shows for five income levels.
What does it save in tax?
The saving is your marginal rate times the deduction. Picture a taxpayer with R500,000 of taxable income before the deduction who pays R5,000 a month, or R60,000 a year. Under the 2026/27 SARS table, income between R383,101 and R530,200 is taxed at R79,998 plus 31% of the amount above R383,100.
Tax on R500,000 is R116,237. After the R60,000 deduction, taxable income is R440,000 and tax is R97,637. The saving is R18,600, before rebates, which are the same in both cases.
SARS adds that the deduction can be set against non-trade income, such as interest.
What happens to contributions above the limit?
They are not lost. SARS says the unclaimed part rolls into the next year of assessment. The exception is any part already used against a lump sum payout or a compulsory annuity.
What if your tax year is short?
Some people have a year of assessment shorter than 12 months, for example after an insolvency. Since 1 March 2024 the cap applies across all their periods between 1 March and the end of February. SARS gives an example, written when the earlier R350,000 limit applied, where R200,000 was used in a first period. That left R150,000 of the R350,000 limit for the second.
When does the tax year end?
SARS says the 2027 tax year runs from 1 March 2026 to 28 February 2027, so the 2026/27 deductions are worked out on that year’s income. For how rates apply to income, see our explainer on tax brackets and rebates, and for the other tax-sheltered option, tax-free savings accounts.
