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Step-by-Step Guide: 2nd Provisional Income Tax for Individuals

This blog follows on from my blog on understanding Provisional income tax better, and my blog regarding how to submit 2nd provisional income tax returns for companies. 2nd provisional income tax submissions are due in a mere 4 weeks from today, on 29 February 2024.

This blog focuses on how to complete your 2nd provisional income tax return as an individual, and what to do in order to avoid penalties and interest.

Are you a provisional income taxpayer?

Any individual who earns income other than renumeration (or a salary) is a provisional taxpayer. The income could be in the form of rental income on a property, your side hustle earnings, interest income (above R23 800 per annum if you are below 65, or R34 500 if you are older than 65) or any other taxable income.

If you are a provisional taxpayer, it is important you remain tax compliant by ensuring your provisional tax return is submitted timeously to SARS and that you are not under-estimating your taxable income in order to avoiding penalties being charged between the actual taxable income and the estimation on the second provisional tax return.

Any provisional tax return that under-estimates the taxable income by a certain amount is subject to 20% penalties, and any late payment is subject to 10% penalties. It is therefore really important to take the 2nd provisional tax return seriously and get advice from a tax consultant if required.

The second provisional income tax payment must be made to SARS by no later than the last working day of the year of assessment ending 29 February 2024 for individual provisional taxpayers.

Steps to work out the amount of provisional tax due

The calculation of your tax liability is subject to the income tax table below:

Tax table for individuals (1 March 2023 - 29 February 2024)

  1. Obtain all your year-to-date payslips from your employer; and estimate your salary and Pay As You Earn (PAYE) deductions for February 2024
  2. If self-employed, earning investment or rental income or other taxable income obtain your year-to-date earnings and estimate your earnings for the month’s remaining in this tax year i.e. January and February 2024. This will allow you to determine what your full income for the year of assessment will/should be.
  3. Use the tax table above to calculate the tax on your taxable income
  4. Deduct any foreign tax credit applicable to worldwide income, if any
  5. Calculate any medical tax credits in relation to medical scheme contributions. I.e. If you and/or your dependents belong to a medical aid, then you will receive a R364 medical tax credit per month for the first two members and a further R246 per month for every other member or dependent on the same policy.
  6. Deduct any applicable rebates as follows:
    – Primary rebate: R 17 235 for all natural persons.
    – Secondary rebate: R 9 444 if the taxpayer is 65 years of age or over.
    – Tertiary rebate: R 3 145 if the taxpayer is 75 years of age or over.
  7. Deduct the year-to-date plus estimated PAYE.
  8. Refer to your 1st Provisional income tax return submitted and deduct the amount paid.
  9. The balance will be the amount of provisional tax you need to pay.
  10. Populate the IRP6 on SARS eFiling website.

An example of Provisional Tax return (IRP6)

Penalty: underestimation of 2nd provisional tax return

The penalty amount depends on whether the actual taxable income is more or less than R1 million.

More than a R1 million

If taxable income for the year of assessment is less than 80% of actual taxable income declared on your annual tax return, 20% penalty will be levied on the difference between the amount of tax payable on 80% of actual taxable income, after taking into account rebates in the determination of normal tax payable, employees’ tax and provisional tax paid.

Less than R1 million

If taxable income for the year of assessment is less than 90% of actual taxable income as finally determined; and the basic amount applicable to the second period, the amount of the penalty is 20% of the difference between the lesser of the amount of normal tax payable for the year of assessment on 90% of actual taxable income as finally determined; and the amount of normal tax payable for the year of assessment on the basic amount applicable to the second period.

Penalty on late payment of 2nd provisional tax return

  • There is a 10% penalty that is levied on late payments.

  • A penalty imposed on underestimation of actual taxable income on the second period; is reduced by the penalty imposed for the late payment of provisional tax.

  • The Commissioner may remit the whole or any part of the penalty if satisfied that the failure to submit an estimate timeously was not due to intent to evade or postpone the payment.