Pension tax exemption rules

The Pensions (Tax Exemption) Rules have been published in terms of the announcement made by the Minister of Finance in the last budget speech.

These rules provide that pension income derived by an individual on or after 1 January 2022 shall be partially or fully exempt from tax as follows:

  • Pensions income derived in year of assessment 2023 (basis year 2022) - amount exempt is 20%
  • Pensions income derived in year of assessment 2024 (basis year 2023) - amount exempt is 40%
  • Pensions income derived in year of assessment 2025 (basis year 2024) - amount exempt is 60%
  • Pensions income derived in year of assessment 2026 (basis year 2025) - amount exempt is 80%
  • Pensions income derived in year of assessment 2027 (basis year 2026) - amount exempt is 100%

Pension income carries the same definition as the term “pension income” in the Tax Rebate (Pensioners) Rules, thus defined in the Income Tax Act and means any pension, charge, annuity or annual payment, whether local pension or foreign pension.

Given that in 2022 and in the subsequent years pensioners may have a chargeable income which is lower than that of previous years, there could be scope to submit a PT reduction form and thus reduce the provisional tax payable. 

Do you need any further assistance about the pension tax exemption rule? Contact us, we can assist you. 

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