With the changes that have occurred for bursaries and scholarships, SARS has released the correct way that these should be reported on the tax certificates. To understand what is meant by the different codes, here is a brief reminder of how these bursaries or scholarships work:
- All bursaries and scholarships must be for study at a recognised and accredited institution.
- All open bursaries or scholarships are exempt from tax.
- If an employee has a deemed remuneration (last year remuneration) of R250 000 per annum or less, they will qualify for the exemptions.
- If the employee or their relative is granted a scholarship to study up to NQF Level 4 (Grade 12 or Matric), the first R10 000 is tax free.
- If the employee or their relative is granted a bursary to study at levels NQF Level 5 to NQF level 10 (Further Education and Training Certificate to Doctorate), the first R30 000 is tax free.
- Any amounts above the exemptions is taxable, and if the employee earns more than the deemed remuneration limit, the full amount is taxable.
Example:
Mr X has two children, the younger is busy completing Grade 11 at school and the older child is at university. Mr X’s deemed remuneration is R 220 000. He applies for the scholarship and bursary for his two children. The company awards a scholarship of R15 000 to the younger child and a bursary of R 35 000 to the older child. The taxable portion will be as follows:
- Younger Child taxable portion is R5 000. R15 000 – R10 000. The first R10 000 is exempt.
- Older Child taxable portion is R5 000. R35 000 – R30 000. The first R30 000 is exempt.
This will be reflected as follows on the Tax Certificate:
R5 000 – Code 3809, Taxable Bursaries or Scholarships (PAYE)
R10 000 – Code 3815, Non-Taxable Bursaries or Scholarships (Excl)
R5 000 – Code 3820, Taxable Bursaries or Scholarships – Further Education (PAYE)
R30 000 – Code 3821, Non-Taxable Bursaries or Scholarships – Further Education (Excl).