What is Code 3602 on a South African Payslip?
Non-taxable income explained — what qualifies, why it still appears on your IRP5, and how to verify it is being used correctly by your employer.
3602Code 3602 is non-taxable income — amounts paid to you by your employer that are exempt from income tax under specific provisions of the South African Income Tax Act. No PAYE is deducted on these amounts. They still appear on your IRP5 so SARS has a complete record of all employment income received.
What Code 3602 Means
Code 3602 sits in the 3600 income series — the same group as your regular taxable salary (code 3601), bonuses (code 3605), and overtime (code 3607). The distinction is in its name: non-taxable. While all other 3600 series codes attract PAYE, code 3602 records income that Parliament has specifically exempted from income tax through provisions in the Income Tax Act No. 58 of 1962, primarily under Section 10.
The key principle is that the exemption must be grounded in specific legislation — your employer cannot simply classify any payment as code 3602 without a valid legal basis. Each amount coded 3602 must qualify under an identified Income Tax Act exemption.
Code 3601 vs Code 3602 — The Core Difference
Taxable Income
Regular salary, wages — PAYE is calculated and deducted monthly. Appears on your IRP5 and forms part of your annual taxable income on which SARS assesses your liability.
Non-Taxable Income
Exempt income — no PAYE deducted. Appears on your IRP5 for transparency and SARS record-keeping but does not increase your tax liability or your annual taxable income total.
Common Examples of Code 3602 Income
The following types of employment-related income commonly qualify for non-taxable treatment under code 3602:
- Disability income payments — certain income received by employees who are permanently disabled, where the payment meets the requirements of Section 10(1)(gC) or related provisions
- Specific government allowances — certain allowances paid to qualifying public servants or officials under designated exemptions
- Exempt portions of approved share incentive schemes — specific qualifying amounts under broad-based employee share plans where SARS has approved non-taxable treatment
- Certain foreign employment income — the exempt portion of income from employment outside South Africa that qualifies under the Section 10(1)(o)(ii) foreign employment exemption (subject to applicable thresholds)
- Approved non-taxable remuneration components — specific components that individual employers are authorised to pay tax-free under SARS-issued tax directives
Not all non-taxable payments appear as code 3602 — non-taxable allowances such as reimbursive travel within the SARS rate have their own codes (3703, 3705). Code 3602 is specifically for income in the salary/remuneration category that qualifies for exemption.
How Code 3602 Affects Your Take-Home Pay
Because no PAYE is deducted on code 3602 amounts, you receive every rand of non-taxable income in full — it increases your take-home pay by the full amount with no tax impact. If you receive both a taxable salary (code 3601) and a non-taxable component (code 3602), only the code 3601 portion feeds into the PAYE calculation.
| Item | Taxable only (3601) | Mixed 3601 + 3602 |
|---|---|---|
| Monthly taxable salary (code 3601) | R25,000 | R20,000 |
| Monthly non-taxable income (code 3602) | — | R5,000 |
| Gross cash received | R25,000 | R25,000 |
| PAYE calculated on | R25,000 | R20,000 |
| Monthly PAYE | R3,447 | R2,397 |
| UIF (on 3601 only) | R177.12 | R177.12 |
| Monthly take-home pay | R21,376 | R22,426 |
The employee receiving R5,000 as non-taxable code 3602 keeps R1,050 more per month than if the same total remuneration were all coded as taxable 3601 — because PAYE is calculated on a lower income base.
If a significant portion of what appears to be regular salary is being coded as 3602, confirm with your payroll department that there is a specific Income Tax Act provision supporting the exemption. Incorrectly classifying taxable income as 3602 to avoid PAYE creates tax liability for both you and your employer — SARS can re-assess and charge penalties and interest on amounts that were exempt without a valid legal basis.
Frequently Asked Questions
What does code 3602 mean on my payslip?
Code 3602 is non-taxable income — amounts paid to you by your employer that are exempt from income tax under specific provisions of the Income Tax Act. No PAYE is deducted on these amounts, so you receive the full amount as take-home pay. They still appear on your IRP5 for SARS record-keeping but do not increase your annual tax liability.
What types of income appear as code 3602?
Common examples include certain disability income payments, specific government employee allowances, exempt portions of approved employee share schemes, and qualifying foreign employment income under Section 10(1)(o)(ii). The exemption must be grounded in a specific Income Tax Act provision — income cannot be arbitrarily designated as non-taxable without a legal basis.
Does code 3602 income appear on my IRP5?
Yes. Even though code 3602 income is non-taxable, it appears on your IRP5 certificate so SARS has a complete record of all amounts paid during the year. It is shown separately from code 3601 taxable income. When you file your ITR12 return, SARS treats the 3602 amount as exempt and does not include it in your taxable income calculation.
Is it normal to have both code 3601 and code 3602 on my payslip?
Yes, for employees who receive both a regular taxable salary and a specific exempt component — such as a disability benefit or a qualifying government allowance. The two amounts appear separately on both the monthly payslip and the annual IRP5 so SARS can distinguish the taxable and non-taxable portions of total remuneration.
Should I be concerned if I see code 3602?
Only if you cannot identify a legitimate reason for the non-taxable designation. If you know you receive a qualifying disability benefit, a specific exempt allowance, or another clearly qualifying payment, code 3602 is appropriate. If regular salary amounts are being coded 3602 without explanation, verify the legal basis with your payroll department — incorrect classification can create tax risk for both employee and employer.
What is the difference between code 3602 and non-taxable allowances?
Code 3602 covers non-taxable income in the salary/remuneration category — exempt amounts that would otherwise be coded as salary income. Non-taxable allowances have their own separate codes in the 3700 series: code 3703 for reimbursive travel within the SARS rate, code 3705 for non-taxable subsistence allowances, and so on. The different codes help SARS track the nature and legal basis of exempt amounts.