Question:
Hi With regards to retirement annuity and provident funds. Are both contributions tax deductible? What does tax deductible mean? Does that mean you deduct the monthly money paid into the contribution from salary, then you pay tax on the remainder. Please let me know Thanks Louis
Answer:
Louis, Under current law, only the employer can deduct contributions to a provident fund. For this reason, employee provident funds are typically structured as a salary sacrifice. Individuals can also deduct up to 15% of their non-pensionable income (that would be income on which your provident fund contributions are NOT calculated, eg private income or bonuses or overtime) in respect of retirement annuity contributions. Tax deductible means that you do not pay tax on that portion of your income that pays your retirement fund contributions.
