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07 Feb 2020

Section 10(1)(q) of the Income Tax Act No. 58 of 1962 (“the Act”) provides for an exemption from income for bona fide scholarships or bursaries granted to enable or assist a person to study at a recognisable educational institution.

Provided certain requirements are met, this exemption may apply in instances where an employer provides a scholarship or bursary to a relative of an employee. “Relative” in this context means the spouse of the employee, or anybody related to the employee or the employee’s spouse within the third degree of consanguity. The potential reach of the definition of “relative” is accordingly very wide – including the employee’s grandchildren, brothers and sisters or nephew and nieces. In addition, adopted children are deemed to be the biological child of their adoptive parent for purposes of this definition.

In order for the above-mentioned exemption to apply to scholarships or bursaries awarded to relatives of employees, the following requirements are to be met:

  1. The “remuneration proxy” of the employee should not exceed R600,000 in relation to a year of assessment.
  • “Remuneration proxy” in relation to a year of assessment, means the remuneration (including any fringe benefits, bonusses etc.) derived by an employee from an employer during the year of assessment immediately preceding the year of assessment – other than the cash equivalent of the occupation of certain residential accommodation;
  • If the employee was not in the employment of the relevant employer during the whole of/ a portion of the preceding year of assessment, an apportionment calculation is applied to determine the remuneration proxy.
  1. The exemption will only apply to the extent that any scholarship or bursary awarded to an employee relative during the year of assessment does not exceed:
  • R20,000 in respect of Grade R-12 as contemplated in the definition of “school” in section 1 of the South African Schools Act No 84 of 1996;
  • R20,000 in respect of a qualification to which an NQF level from 1 up to and including 4 has been allocated in accordance with applicable South African legislation;
  • R60,000 in respect of a qualification to which an NQF level from 5 up to and including 10 has been allocated in accordance with application South African legislation.


The exemption provided from in section 10 (1)(q) can be illustrated by way of the following example:

X’s salary is R500,000 per annum. Should X’s employer decide to grant a bursary in the amount of R60,000 per annum to X’s daughter to study at UCT, X’s salary may be structured as follows:

Section10(10)q) example

*The outcome should be the same if X had three children each receiving a R20,000 scholarship to attend, for example, Grade 1, 3 and 7 of Primary School.

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