Itcexemptincome

After an amount has passed the gross income gate (a Zimbabwean-source receipt that is not capital, or that is dragged in by a specific inclusion paragraph), the next step in the computation funnel is to subtract exemptions. The governing provision is Section 14 of the Income Tax Act [Chapter 23:06], which is deceptively short: Section 14(1) says simply that "there shall be exempt from income tax the amounts specified in the Third Schedule." All of the substance lives in the Third Schedule, a long, paragraph-by-paragraph catalogue of exempt receipts. The definition of "income" in Section 8(1) confirms the mechanics: "income" = gross income less the amounts exempt from income tax under this Act. Exemptions therefore operate inside the computation — the amount is gross income, but it is then taken out before deductions are considered.

It is vital to distinguish an exemption from an exclusion. A capital amount is excluded — it never enters gross income at all (see Capital vs Revenue Receipts). An exempt amount does enter gross income and is then removed by Section 14. The distinction matters for the order of analysis, for the onus (the taxpayer must bring the amount within a Third Schedule paragraph), and for interactions such as the rule in Section 16(1)(f) that expenditure incurred to produce exempt income is not deductible.

The Third Schedule is best understood by category. Paragraphs 1–3 exempt the receipts and accruals of named entities and bodies — local authorities and the Reserve Bank (para 1); non-profit, ecclesiastical, charitable, educational, friendly, medical-aid and pension bodies, building societies' mortgage-finance income, trade unions and public trusts (para 2); and foreign governments, international organisations, qualifying venture-capital companies/funds and qualifying REITs (para 3). Paragraph 4 exempts a long list of emoluments and allowances — including the headline reliefs every payroll must apply: the bonus exemption of US$700 per year (substituted by the Finance Act 2024), the retrenchment exemption of the greater of US$3,200 or one-third of the package, capped at US$15,100 (para 4(p)), the non-executive director's fees already taxed by withholding (para 4(w)), and the rental exemption of the first US$3,000 for taxpayers aged 55 or over (para 4(v)). Paragraphs 5–7 exempt pensions and compensation (presidential, war-related, workplace-injury, and pensions paid to taxpayers aged 55+). Paragraph 8 exempts employer-provided medical benefits and contributions and half of the school benefit. Paragraph 9 is the cornerstone local-dividend exemption — a dividend from a company incorporated in Zimbabwe and chargeable to income tax is exempt (preventing economic double taxation), but not a deemed dividend under Sections 26(2)/28(2). Paragraphs 10–11 exempt specified interest (savings certificates, government and development-bank loans, the first US$3,000 of deposit interest for the 55+, interest already subject to residents' tax under the Twenty-First Schedule, and certain non-resident loan interest). Paragraphs 12–20 are a miscellany — alimony, traditional-beer proceeds, export-scheme payments, industrial-park developers, and employee share-ownership-trust proceeds.

Two override rules in Section 14 itself must never be forgotten. Section 14(2): the entity exemptions in paragraphs 1 and 2 do not extend to the salaries, wages, allowances, other remuneration or pensions of the people those bodies employ — work for an exempt charity and your salary is still taxable. Section 14(3): the investment exemptions in paragraphs 9, 10 and 11 do not apply to any annuity paid out of those amounts.

The leading authority is Zimbabwe Revenue Authority v FC Platinum 22-SC-044, which polices the boundary of the "public character" charitable/educational exemption in paragraph 2(e) and holds that a body which registers as a company limited by guarantee can lose its exemption. The Endeavour Foundation v COT 95-SC-095 addresses the public-trust exemption, and Old Mutual Zimbabwe v Commissioner-General 16-HH-143 the employee share-ownership-trust exemption in paragraph 19 (and the point that "capital" is not the same as "exempt"). Throughout, remember that the figures and age thresholds are amended almost every year by the Finance Act; this lesson states the position confirmed in the 27 May 2025 source Act for the 2025 year of assessment, and flags where a figure must be re-checked.

---

As established in the lessons on Income Tax Foundations and Gross Income, Zimbabwe computes income tax through a funnel: gross income, less exemptions, gives "income"; "income" less deductions gives "taxable income"; taxable income times the Finance Act rate, less credits, gives the tax (plus the AIDS Levy). Exemptions are the second stage of that funnel, and the definition of "income" in Section 8(1) makes the mechanics explicit: "'income' means the amount remaining of the gross income … after deducting therefrom any amounts exempt from income tax under this Act."

Two features of that sentence are load-bearing. First, an exempt amount is gross income — it has already passed the source and capital gates — and is then subtracted. Second, the subtraction is governed entirely by "this Act", and the Act channels the whole question into Section 14 and the Third Schedule. There is no general "fairness" power to exempt; if an amount is not in the Third Schedule (or another specific exempting provision), it is not exempt, however sympathetic the case.

Why does the distinction between exemption and exclusion matter so much that we return to it? Because they behave differently:

• An excluded (capital) amount never enters gross income; you reach it through the capital/revenue analysis and, where relevant, hand it to Capital Gains Tax.
• An exempt amount enters gross income and is removed by Section 14; expenditure to earn it is non-deductible under Section 16(1)(f) (expenditure producing exempt income); and it can still affect other computations (for example, it does not create or augment an assessed loss).

This lesson builds directly on Gross Income (the funnel) and Specific Inclusions (what is in gross income before exemptions are applied), and it interacts with Prohibited Deductions (Section 16(1)(f)), Withholding Taxes (paragraphs 9, 10A and the NED-fees exemption, which exist because the income is taxed at source), and Taxation of Individuals (the bonus, retrenchment, and age-55 reliefs). ZIMRA audit interest is highest where taxpayers over-claim an exemption — treating a whole charity's trading income as exempt, exempting an employee's salary because the employer is exempt (forbidden by Section 14(2)), or exempting a foreign dividend under paragraph 9 (which is limited to Zimbabwe-incorporated companies).

B.1 Section 14 — the operative provision

Section 14(1): "There shall be exempt from income tax the amounts specified in the Third Schedule." This is the whole charge-relieving rule; the Third Schedule supplies the list.

Section 14(2): the exemptions in paragraphs 1 and 2 of the Third Schedule "shall not extend to the salaries, wages, allowances, other remuneration or pensions of persons employed by" the exempt bodies, "although the same may be paid wholly or in part out of the revenues or funds thereof." In plain terms: the body's income is exempt; its employees' pay is not.

Section 14(3): the exemptions in paragraphs 9, 10 and 11 (dividends and interest) "shall not apply in respect of any portion of an annuity paid out of" those amounts. Investment income that is repackaged as an annuity does not carry the exemption through.

The source Act annotates Section 14 with ZIMRA v FC Platinum 22-SC-044 — the key case on the limits of the charitable/public-character exemption.

B.2 Third Schedule, paragraphs 1–3 — exempt entities and bodies

Paragraph 1 — public and quasi-public bodies. The receipts and accruals of: Local Authorities; the Reserve Bank of Zimbabwe; the Zambezi River Authority; the Environment Management Board; the People's Own Savings Bank (POSB); the RBZ's wholly-owned ZAMCO; the Victoria Falls Stock Exchange (VFEX); and special purpose vehicles building on-campus student accommodation at public tertiary institutions.

Paragraph 2 — non-profit, charitable and mutual bodies. The receipts and accruals of: (a) agricultural, mining and commercial institutions or societies not operating for private pecuniary profit of members; (b) benefit funds; (c) building societies and financial institutions only to the extent attributable to providing mortgage finance (defined as loans for the acquisition of immovable property for residential purposes secured by that property — substituted by Finance Act (No. 2) 7/2024 w.e.f. 1 January 2025); (d) social, recreational and professional clubs/associations whose income may not enure to members; (e) ecclesiastical, charitable and educational institutions of a public character (consisting of donations/tithes/offerings and non-trade income, or trade income of a company of which the institution is the sole/principal member where the Minister has licensed it); (f) employee savings schemes; (g) friendly, benefit or medical aid societies; (h) Treasury-established funds; (i) pension funds; (j) statutory corporations declared exempt by the Minister; (k) trade unions; (l) trusts of a public character; (m) the Deposit Protection Fund; (n) the Investor Protection Fund; (o) the Insurance and Pensions Housing Company; (p) the Agricultural Development Fund.

Paragraph 3 — foreign and development bodies. The receipts and accruals of: foreign government agencies approved by the Minister; international organisations under the Privileges and Immunities Act; bodies under the International Financial Organizations Act; the African Development Bank and Fund; the South African Reserve Bank; foreign development-finance organisations on approved projects; treaty-exempt persons; foreign banks lending to the RBZ; qualifying venture capital companies/funds (resident, tax-compliant, equity-led, not investing in property/finance/advisory/gaming, recipient unlisted and in a priority sector); and qualifying real estate investment trusts (REITs) (≥80% of taxable income from real estate, distributing ≥80% as dividends, ≥100 shareholders, listed). Financial institutions' income from Treasury Bills is exempt where the terms sheet so specified.

B.3 Third Schedule, paragraph 4 — emoluments and allowances

Paragraph 4 exempts numerous employment-related amounts. The most practically important are:

• (o) Bonus / performance award — exempt to the extent the aggregate of bonuses in the year does not exceed US$700 (substituted by the Finance Act 2024). Bonus above US$700 is taxable.
• (p) Retrenchment package — exempt as to the greater of US$3,200 or one-third of any severance pay, gratuity or similar benefit (other than a pension or cash in lieu of leave) paid on cessation by retrenchment, capped at US$15,100 in any one year of assessment (amended by Finance Act 13/2023).
• (v) Rental income, age 55+ — the first US$3,000 of rental income accruing in the year to a taxpayer of or over 55.
• (w) Non-executive director's fees — fees from which tax is withheld under the Thirty-Third Schedule (taxed at source, so exempt from the normal computation).
• (m) Scholarships/bursaries — for a student's instruction (excluding remuneration for services).
• (a)–(c1), (d1) — Presidential, parliamentary, judicial and senior-State emoluments and benefits specified by the President; Privileges and Immunities exemptions.
• (e)–(l), (t), (u), (x), (y) — chiefs'/headmen's allowances; defence active-service and ration benefits; medal gratuities; State foreign-service allowances; honours gratuities; mission-hospital/rural-clinic accommodation; Recovered Foreign Currency Fund awards; monetary benefit in lieu of a motor vehicle for specified commissioners/directors; and the time-limited COVID-19 frontline health risk allowance.
• (1a) — treaty-exempt salary under an International Treaties Act agreement.

B.4 Third Schedule, paragraphs 5–7 — pensions and compensation

• Paragraph 5 — pensions and benefits under the Presidential Pension and Retirement Benefits Act.
• Paragraph 6 — war disability/widow's pensions; pensions under the War Veterans / Veterans of the Liberation Struggle Act; the Old Age Pensions Act pension; workplace injury/disease/disablement/death awards and pensions; War Victims Compensation; Wankie Disaster Relief; (h) a pension from a pension fund or the Consolidated Revenue Fund to a taxpayer who attained 55 before the year of assessment; (h1) a portion of a retrenchment-related commutation (greater of US$1,500 or one-third, on a package up to US$10,000) for those under 55.
• Paragraph 7 — benefits for injury, sickness or death paid by a trade union, a benefit fund, an accident/sickness/death insurance policy, or a medical aid society.

B.5 Third Schedule, paragraph 8 — medical benefits

• (1) the value of medical treatment or travel for treatment provided by an employer for an employee or dependant (in kind, by direct payment, by refund or otherwise) — note the editorial caveat that it does not cover a director who is not an employee;
• (2) employer contributions to a medical aid society on behalf of employees;
• (3) half the value of a school benefit (per paragraph (f) of "advantage or benefit"), limited to 3 children.

B.6 Third Schedule, paragraph 9 — the local-dividend exemption

Paragraph 9 exempts "an amount … by way of a dividend from a company which is incorporated in Zimbabwe and is charged or chargeable to income tax." The exemption does not apply to an amount that is a deemed dividend under Section 26(2) or 28(2) (excess related-party amounts re-characterised as dividends — see Withholding Taxes and Transfer Pricing). The policy is to prevent economic double taxation: the company's profits are taxed at company level (25%), so distributing them to shareholders should not be taxed again as income. Instead, the dividend is taxed (if at all) through the resident or non-resident shareholders' tax (withholding), not through the ordinary computation. Note the limitation: the company must be Zimbabwe-incorporated — a dividend from a foreign company is not exempt under paragraph 9 (it is taxable, with foreign-company dividends charged at a special Finance Act rate and relieved by credit/DTA).

B.7 Third Schedule, paragraphs 10–11 — interest exemptions

Paragraph 10 exempts interest on a list of instruments: savings certificates; POSB deposits; tax reserve certificates; exempt State loans; European Investment Bank and IDBZ loans; class "C" building-society shares; (n)/(o) the first US$3,000 of deposit/discounted-instrument interest accruing to a taxpayer aged 55 or over; the Diaspora Bond; AMA bills; loans to small-scale gold miners; deposits with a tenure of more than 12 months; and low-cost-housing savings instruments. Paragraph 10A exempts interest from which residents' tax on interest is withheld under the Twenty-First Schedule (because it is taxed finally at source). Paragraph 11 exempts certain non-resident interest — on loans to mining operators, the State, local authorities and statutory corporations — subject to anti-avoidance carve-outs where the lender is Zimbabwe-controlled or the exemption would merely shift tax to another country.

B.8 Third Schedule, paragraphs 12–20 — miscellaneous

• 12 — alimony, howsoever paid.
• 13 — proceeds of traditional beer sales devoted to required purposes.
• 14 — State export-development scheme payments (excluding duty refunds).
• 15 — an allowance under Section 16(1)(m) to the extent expended on the employer's business.
• 16 — the RBZ export/remittance incentive premium.
• 17 — an industrial park developer's operating receipts, in the establishment/approval year and the next 4 years.
• 18 — proceeds of selling a duty exemption certificate.
• 19 — amounts accruing to an employee from an approved employee share ownership trust (annotated with Old Mutual 16-HH-143).
• 20 — power-generation project exemption (repealed w.e.f. 31 December 2020).

C.1 Exemption vs exclusion vs deduction — three different operations

A frequent confusion is between three operations that all reduce tax but work differently:

• Exclusion (capital): the amount never enters gross income. Reached by the capital/revenue test. Relevant tax head: CGT.
• Exemption (Section 14): the amount enters gross income, then is subtracted to arrive at "income". Reached by finding a Third Schedule paragraph. Expenditure to earn it is non-deductible (Section 16(1)(f)).
• Deduction (Section 15): an expense is subtracted from "income" to reach "taxable income". A different stage of the funnel entirely.

The practical test: ask "is this amount of a capital nature?" (if yes → exclusion) before asking "is this amount in the Third Schedule?" (if yes → exemption). The two are mutually exclusive routes out of tax, and conflating them produces wrong answers about onus and about deductibility of related expenses.

C.2 The onus and the "public character" boundary

Exemptions are reliefs, and the onus of bringing an amount within a Third Schedule paragraph rests on the taxpayer (consistent with Section 63 and the canon that exempting provisions are construed against the claimant — see Sources and Interpretation). This is why the "public character" exemption in paragraph 2(e) is so heavily litigated. ZIMRA v FC Platinum 22-SC-044 illustrates the limits: a body claiming the ecclesiastical/charitable/educational exemption must genuinely be of a public character and must not have stepped outside the paragraph's structure; the case holds that registering as a company limited by guarantee can take a body outside the exemption. The lesson for advisers: the form the institution adopts, and whether its income is trade/investment income or genuine donation/contribution income, can decide the exemption.

C.3 Why the entity exemptions do not reach employees (Section 14(2))

It feels intuitive that if a charity's income is exempt, its staff might be paid tax-free. Section 14(2) expressly forbids this for paragraphs 1 and 2: the exemption attaches to the body's receipts, not to the remuneration it pays. The salary of a person employed by an exempt local authority, church, school or pension fund is ordinary employment income under Section 8(1)(b) and is fully taxable through PAYE. This is one of the most common and costly errors in practice.

C.4 The local-dividend exemption and the integration of company tax

Paragraph 9 is the keystone of Zimbabwe's approach to dividend taxation. Company profits are taxed once at the company level (25% for YA 2025). To avoid taxing the same economic profit again when distributed, a dividend from a Zimbabwe-incorporated, taxable company is exempt in the shareholder's hands under paragraph 9. The dividend is instead subject to withholding — resident shareholders' tax (Section 28) for residents, non-resident shareholders' tax (Section 26) for non-residents — which is the system's way of collecting a measured second-tier charge. Three boundaries must be held:

• The exemption is for Zimbabwe-incorporated companies. A foreign dividend is not exempt (it is taxable income, charged at a special Finance Act rate, with credit/DTA relief — see Double Taxation Agreements).
• The exemption does not apply to a deemed dividend under Sections 26(2)/28(2) (excess transfer-pricing amounts re-characterised as dividends).
• Section 14(3) prevents the exemption being carried through an annuity funded from such dividends.

C.5 Interest exemptions and the withholding overlay (paragraphs 10, 10A)

The interest exemptions split into two logics. Some interest is exempt because the legislature wants to encourage the instrument (savings certificates, the Diaspora Bond, small-scale gold-miner loans, long-tenure deposits, the age-55+ US$3,000 relief). Other interest is exempt from the ordinary computation because it is already taxed finally at source — paragraph 10A exempts interest from which residents' tax on interest has been withheld under the Twenty-First Schedule. The two must not be double-counted: if interest has suffered final withholding under the Twenty-First Schedule, it is removed from the ordinary computation by paragraph 10A; it is not also "exempt" under paragraph 10. (See Withholding Taxes for the rates — broadly 15%, or 5% on qualifying ≥90-day deposits.)

C.6 The age-55 relief cluster

A recurring policy theme is relief for older taxpayers. Three separate paragraphs grant the first US$3,000 to a taxpayer of or over 55: paragraph 4(v) (rental income), paragraph 10(n)/(o) (deposit/discounted-instrument interest), and — at the pension level — paragraph 6(h) exempts a pension paid from a fund or the CRF to a taxpayer who attained 55 before the year of assessment. These are per-category reliefs (each US$3,000 limit applies to its own stream), and they are age-tested at the start of the year of assessment. A common error is to aggregate them into a single allowance or to apply them to a taxpayer who turns 55 mid-year.

D.1 Individuals

Scenario 1 — bonus and retrenchment (paragraphs 4(o), 4(p)). Rudo earns a US$1,500 annual bonus and, later in YA 2025, is retrenched with a US$30,000 severance package.

• Bonus: exempt up to US$700; the remaining US$800 is taxable.
• Retrenchment: exempt as to the greater of US$3,200 or one-third of the package. One-third of US$30,000 = US$10,000, which exceeds US$3,200, but the exemption is capped at US$15,100. So US$10,000 is exempt (within the cap) and US$20,000 is taxable.

Scenario 2 — the age-55 reliefs. Mr Banda, aged 60, earns US$4,500 rental income and US$3,500 deposit interest in YA 2025. Under paragraph 4(v) the first US$3,000 of rent is exempt (US$1,500 taxable); under paragraph 10(n) the first US$3,000 of deposit interest is exempt (US$500 taxable, subject to the interest-withholding regime). The two US$3,000 reliefs are separate, one per stream.

Scenario 3 — employee of an exempt body (Section 14(2)). Grace is the accountant at an exempt charitable school. Although the school's receipts are exempt under paragraph 2(e), Section 14(2) means Grace's salary is fully taxable through PAYE. Her medical-aid contributions paid by the school are, however, exempt under paragraph 8(2).

D.2 SMEs and partnerships

Scenario 4 — dividend received by an SME (paragraph 9). Tsime Holdings (Pvt) Ltd holds shares in a Zimbabwe-incorporated, tax-paying subsidiary and receives a US$50,000 dividend. Under paragraph 9 the dividend is exempt in Tsime's hands (the subsidiary already paid 25% company tax); no further income tax arises on it. Had the dividend come from a foreign company, it would not be exempt — it would be taxable, with DTA/credit relief.

Scenario 5 — a members' club (paragraph 2(d)). A sports club's subscription and bar surplus are exempt under paragraph 2(d) only if the income may not enure to members' benefit (other than remuneration for services). If the club distributes surpluses to members or registers as a profit company, the exemption is lost (cf. FC Platinum on the company-limited-by-guarantee point).

D.3 Large corporates and multinationals

Scenario 6 — a REIT (paragraph 3(j)). Cityscape REIT is listed on the VFEX, has 130 shareholders, derives 90% of its taxable income from real estate and distributes 85% as dividends. It satisfies the paragraph 3(j) conditions (≥80% real-estate income; ≥80% distribution; ≥100 shareholders; listed), so its qualifying receipts are exempt, shifting the tax to investors. Failing any condition (e.g. distributing only 70%) forfeits the exemption.

Scenario 7 — non-executive directors (paragraph 4(w)). MegaCorp pays its non-executive directors' fees net of withholding under the Thirty-Third Schedule. Because the fees are taxed at source, paragraph 4(w) exempts them from the ordinary computation — MegaCorp's directors do not also declare them as ordinary income, avoiding double taxation.

Scenario 8 — venture capital fund (paragraph 3(i)). A resident, tax-compliant venture capital fund financing unlisted Zimbabwean manufacturers predominantly by equity, and not investing in property/finance/advisory/gaming, qualifies for exemption on its receipts — a deliberate incentive for development capital. If it lends rather than takes equity, or invests in a prohibited sector, the exemption is denied.

• Zimbabwe Revenue Authority v FC Platinum 22-SC-044 (Zimbabwe, SC) — the central exemption case, annotated to Section 14 and paragraph 2. It polices the "public character" charitable/educational/ecclesiastical exemption and holds that a body which registers as a company limited by guarantee can lose its exemption; the exemption depends on the body's true character and structure, not merely its stated objects.
• The Endeavour Foundation and UDC Ltd v COT 95-SC-095 (Zimbabwe, SC) — annotated to paragraph 2(l), the trust of a public character exemption; relevant also to representative-taxpayer/agency questions (cited in the Administration lesson).
• Old Mutual Zimbabwe Ltd v Commissioner-General of ZIMRA 16-HH-143 (Zimbabwe) — annotated to paragraph 19, the approved employee share ownership trust exemption; authority for the broader point that "capital" is not the same as "exempt" and that a receipt must fit an actual exempting provision.

Where no Zimbabwean authority is annotated for a particular exemption, the area is governed by the statutory words and the canon that exemptions are construed against the claimant (Sources and Interpretation lesson) rather than by invented case law.

1. Exempting an employee's pay because the employer is exempt. Section 14(2) forbids it for paragraphs 1 and 2 — staff salaries/pensions are fully taxable.
2. Treating a foreign dividend as exempt under paragraph 9. The exemption is limited to Zimbabwe-incorporated, taxable companies; foreign dividends are taxable (special rate; DTA/credit relief).
3. Forgetting the deemed-dividend carve-out. A dividend deemed paid under Sections 26(2)/28(2) is not exempt under paragraph 9.
4. Over-claiming the bonus and retrenchment reliefs. The bonus exemption is only US$700 (aggregate); the retrenchment exemption is the greater of US$3,200 or one-third, capped at US$15,100 — the excess is taxable.
5. Aggregating the age-55 reliefs. The US$3,000 rental relief and the US$3,000 interest relief are separate per-stream limits, age-tested at the start of the year.
6. Double-counting interest exemptions. Interest subject to final residents' tax (Twenty-First Schedule) is removed by paragraph 10A; do not also claim it under paragraph 10 or include it again in the computation.
7. Confusing exemption with exclusion. A capital amount is excluded (never gross income; CGT territory); an exempt amount is gross income then removed by Section 14 — with knock-on effects under Section 16(1)(f) (no deduction for expenditure producing exempt income).
8. Assuming a charity's trading income is exempt. Paragraph 2(e) distinguishes donation/contribution income from trade or investment income; the latter is exempt only within the licensed-company structure the paragraph specifies (FC Platinum).
9. Using a stale figure. The dollar thresholds change almost yearly by Finance Act — always confirm the figure for the specific year of assessment.

Work through the questions one at a time. Choose an answer and it is graded immediately, with an explanation and the provision it comes from. Your progress is saved, so you can stop and resume.

• Section 14(1) exempts only "the amounts specified in the Third Schedule." The definition of "income" subtracts exemptions from gross income — exemptions operate inside the funnel.
• Exemption ≠ exclusion ≠ deduction. Capital is excluded (never gross income; CGT); exempt amounts are gross income then removed by Section 14; deductions are expenses at the next stage. Section 16(1)(f) denies deductions for expenditure producing exempt income.
• Entity exemptions (paras 1–3): local authorities, RBZ, POSB, ZAMCO, VFEX (para 1); non-profits, charities/churches/schools of public character, medical-aid and pension funds, building-society mortgage-finance income, trade unions, public trusts (para 2); foreign governments, international organisations, venture capital funds and REITs (para 3).
• Section 14(2): entity exemptions do not extend to employees' pay — salaries of staff at exempt bodies are fully taxable.
• Emoluments (para 4): bonus exempt to US$700; retrenchment exempt to the greater of US$3,200 or one-third, capped at US$15,100; NED fees withheld under the 33rd Schedule exempt; rental US$3,000 for the 55+.
• Pensions/compensation (paras 5–7): presidential, war, workplace-injury, and pension to the 55+; injury/sickness/death benefits from unions, funds, insurance and medical aid.
• Medical (para 8): employer-provided treatment/travel and medical-aid contributions exempt; half the school benefit (≤3 children).
• Local-dividend exemption (para 9): a dividend from a Zimbabwe-incorporated, taxable company is exempt (integration with the 25% company tax) — not a foreign dividend, and not a deemed dividend under Sections 26(2)/28(2).
• Interest (paras 10, 10A, 11): incentive exemptions (savings, Diaspora Bond, 55+ US$3,000, long-tenure deposits) and source-taxation exemption (para 10A, interest finally taxed under the 21st Schedule). Section 14(3): paras 9–11 do not carry through an annuity.
• Leading cases: FC Platinum 22-SC-044 (public-character limits; company-limited-by-guarantee can lose exemption), Endeavour Foundation 95-SC-095 (public trust), Old Mutual 16-HH-143 (employee share trust; "capital" ≠ "exempt").
• The figures change yearly — always confirm the bonus/retrenchment/age-55 thresholds against the Finance Act for the specific year of assessment.

---

Table 1 — The Third Schedule exemptions by category

Category	Paragraphs	Examples
Public/quasi-public bodies	1	Local authorities, RBZ, POSB, ZAMCO, VFEX
Non-profit & mutual bodies	2	Charities/churches/schools of public character, pension funds, medical-aid societies, trade unions, public trusts
Foreign & development bodies	3	International organisations, AfDB, venture-capital funds, REITs
Emoluments & allowances	4	Bonus (US$700), retrenchment (US$3,200/⅓, cap US$15,100), NED fees, rental 55+ (US$3,000)
Pensions & compensation	5–7	Presidential, war, workplace-injury, pension to 55+, injury/sickness/death benefits
Medical benefits	8	Employer medical treatment & contributions; half school benefit (≤3 children)
Dividends	9	Dividend from a Zimbabwe-incorporated taxable company (not foreign; not deemed)
Interest	10, 10A, 11	Savings certificates, Diaspora Bond, 55+ US$3,000, 21st-Schedule-taxed interest, certain NR loan interest
Miscellaneous	12–19	Alimony, traditional beer, export schemes, industrial-park developer, employee share trust

Table 2 — Exemption vs exclusion vs deduction

Operation	Where in the funnel	Test	Effect on related expenditure
Exclusion (capital)	Before gross income	Capital/revenue analysis	Outside income tax; CGT may apply
Exemption (Section 14 / 3rd Sch)	Gross income → income	Find a Third Schedule paragraph	No deduction for costs of earning it (Section 16(1)(f))
Deduction (Section 15)	Income → taxable income	Incurred for trade/production of income	Itself a subtraction of expense

Table 3 — Headline individual reliefs (YA 2025)

Relief	Paragraph	Amount
Bonus / performance award	4(o)	Exempt up to US$700 (aggregate)
Retrenchment package	4(p)	Greater of US$3,200 or ⅓, capped at US$15,100
Rental income, age 55+	4(v)	First US$3,000
Deposit interest, age 55+	10(n)/(o)	First US$3,000
Pension to taxpayer 55+	6(h)	Exempt
Employer medical / medical-aid	8(1),(2)	Exempt

Diagram — Is the amount exempt?

flowchart TD
 A[Amount is gross income] --> B{Is it of a capital nature?}
 B -->|Yes| C[Excluded, not exempt; consider CGT]
 B -->|No| D{Listed in the Third Schedule?}
 D -->|No| E[Taxable: carry to deductions stage]
 D -->|Yes| F{Override applies?}
 F -->|Section 14 2 employee pay of exempt body| E
 F -->|Section 14 3 annuity from paras 9 to 11| E
 F -->|Deemed dividend Sections 26 2 or 28 2| E
 F -->|No override| G[Exempt: subtract to reach income]

---

Statutes & sections (Income Tax Act [Chapter 23:06])

• Section 14 — exemptions: 14(1) (amounts in the Third Schedule); 14(2) (paras 1–2 do not extend to employees' remuneration/pensions); 14(3) (paras 9–11 do not apply to annuities).
• Section 8(1) — definition of "income" (gross income less exempt amounts), fixing the place of exemptions in the funnel.
• Third Schedule — paragraphs 1–20: entity exemptions (1–3); emoluments/allowances (4, incl. (o) bonus US$700, (p) retrenchment US$3,200/⅓/US$15,100, (v) rental 55+ US$3,000, (w) NED fees); pensions/compensation (5–7, incl. 6(h) pension to 55+); medical (8); local-dividend exemption (9); interest (10, 10A, 11, incl. 10(n)/(o) 55+ US$3,000 and 10A 21st-Schedule interest); miscellaneous (12–19).
• Section 16(1)(f) — no deduction for expenditure producing exempt income (see Prohibited Deductions).
• Sections 26 / 28 and 26(2)/28(2) — non-resident/resident shareholders' tax and deemed dividends excluded from the paragraph 9 exemption (see Withholding Taxes).
• Twenty-First Schedule — residents' tax on interest (the source-taxation reason for paragraph 10A).
• Thirty-Third Schedule — non-executive directors' fees withholding (the reason for paragraph 4(w)).

Finance Act [Chapter 23:04]

• Annual amendment of the dollar thresholds (bonus, retrenchment, age-55 reliefs) and the rates that make the dividend/interest exemptions coherent (25% company rate; foreign-dividend special rate).

Case law (annotated in the source Act)

• Zimbabwe Revenue Authority v FC Platinum 22-SC-044 — limits of the public-character charitable/educational exemption; company-limited-by-guarantee can lose exemption.
• The Endeavour Foundation and UDC Ltd v COT 95-SC-095 — trust of a public character (para 2(l)).
• Old Mutual Zimbabwe Ltd v Commissioner-General of ZIMRA 16-HH-143 — approved employee share ownership trust (para 19); "capital" is not "exempt".

Related lessons

• Gross Income (the funnel), Specific Inclusions (what is in gross income before exemptions), Prohibited Deductions (Section 16(1)(f)), Withholding Taxes (paras 9, 10A, 4(w)), Taxation of Individuals (bonus/retrenchment/age-55 reliefs), Double Taxation Agreements (foreign dividends), Capital vs Revenue Receipts (exclusion vs exemption).