⬅️ Back to Main Menu
The Ultimate Guide to the NISA (開始！新しい NISA)
This guide is your complete resource for understanding the new NISA (Nippon Individual Savings Account), arguably the most powerful tool for tax-free wealth building available to residents of Japan since its 2024 overhaul.
The Japanese government has revamped the NISA program to strongly encourage a shift from saving to investing. The primary benefit is simple but powerful: investment profits (capital gains and dividends) are completely tax-free. Under normal circumstances, these profits are taxed at a rate of 20.315%. The new NISA eliminates this tax, allowing your money to grow much more efficiently.
This guide will break down everything you need to know.
Table of Contents
Old NISA vs. New NISA: What’s the Difference?
Before diving in, it’s important to understand the distinction between the two NISA systems.
The Old NISA (旧 NISA)
The Old NISA refers to the NISA system that was available until the end of 2023. It had two main types (General NISA and Tsumitate NISA) with stricter limits and temporary tax-free periods. It is no longer possible to make new investments into the Old NISA system.
The New NISA (新しい NISA)
The New NISA is the completely revamped system that began in January 2024. It features higher investment limits, a permanent tax-free period, and greater flexibility. It is the only NISA system available for new investments.
⚠ IMPORTANT ⚠: This entire document focuses exclusively on the New NISA (2024 system), as this is the current and ongoing program for all investors.
With NISA vs. Without NISA: A Clear Example
Let’s see the real-world impact of NISA’s tax-free benefit. Imagine you invest ¥1,000,000 and, after some time, you sell your investment for ¥1,200,000, making a profit of ¥200,000.
Without NISA (Standard Taxable Account)
- Profit: ¥200,000
- Tax Rate: 20.315%
- Tax Owed: ¥200,000 * 20.315% = ¥40,630
- Take-Home Profit: ¥200,000 - ¥40,630 = ¥159,370
With NISA
- Profit: ¥200,000
- Tax Rate: 0%
- Tax Owed: ¥0
- Take-Home Profit: ¥200,000
By using NISA for this single transaction, you kept an extra ¥40,630 that would have otherwise gone to taxes.
Key Features of the New NISA (2024 System)
The 2024 reform made significant improvements over the old system. Here are the most important changes at a glance:
| Feature |
New NISA (2024 onwards) |
Old NISA (until 2023) |
| System Duration |
Permanent |
Time-limited |
| Tax-Free Holding Period |
Unlimited |
5 years (General) or 20 years (Tsumitate) |
| Annual Investment Limit |
Up to ¥3.6 million |
¥1.2 million (General) or ¥400,000 (Tsumitate) |
| Lifetime Tax-Free Limit |
¥18 million |
No lifetime limit, but annual limits were smaller |
| Using Both Allowances |
Yes (Tsumitate + Growth) |
No (had to choose one per year) |
| Reusing the Limit |
Yes, the lifetime limit can be reused |
No |
The Two Investment Allowances: Tsumitate vs. Growth
The new NISA is composed of two parts, or “allowances” (waku, 枠). You can use both of them in the same year.
1. Tsumitate (つみたて) Investment Allowance
This allowance is designed for steady, long-term asset building through regular investments.
- Annual Limit: ¥1.2 million (up to ¥100,000 per month)
- Investment Method: You must make regular, recurring investments (e.g., monthly tsumitate purchases). Lump-sum investments are not possible in this allowance.
- Eligible Products: A curated list of low-cost, diversified investment trusts and ETFs that the Financial Services Agency (FSA) has deemed suitable for long-term, diversified investing. These are generally index funds tracking markets like the S&P 500 or the All-Country World Index (ACWI).
- Best For:
- Investment beginners.
- Building a core, diversified portfolio.
- Automating your savings with a “set it and forget it” approach.
- Utilizing dollar-cost averaging (DCA) to smooth out market volatility.
2. Growth (成長) Investment Allowance
This allowance offers more flexibility for investors who want more control over their investments.
- Annual Limit: ¥2.4 million
- Investment Method: Completely flexible. You can invest in a lump sum, make multiple purchases throughout the year, or set up regular investments.
- Eligible Products: A much broader range of products, including:
- Individual stocks (Japanese and foreign)
- Most investment trusts (including active funds)
- ETFs and REITs
- Exclusions: Certain high-risk products are excluded, such as funds with a very short trust period, highly leveraged funds, or most funds that pay out monthly dividends.
- Best For:
- Investors who want to buy individual company stocks.
- Making larger, lump-sum investments (e.g., with a bonus).
- Investing in specific sectors or themes not available in the Tsumitate allowance.
The Lifetime Non-Taxable Limit (生涯非課税限度額)
This is one of the most powerful features of the new NISA.
- Total Lifetime Limit: You can invest a total of ¥18 million over your lifetime.
- Growth Allowance Sub-limit: Of the ¥18 million total, a maximum of ¥12 million can be used within the more flexible Growth allowance.
- Management: The limit is tracked based on the principal amount (acquisition cost) of your investments, not their current market value.
Think of it like a water bottle: the limit is based on how much water you pour in (principal), not how much it expands or shrinks inside the bottle (market value changes).
A Revolutionary Feature: The Limit is Reusable
When you sell an asset, the original purchase price (principal or acquisition cost) of that investment frees up space in your lifetime limit. This space becomes available to use again starting from the next calendar year.
Example of Reusing the Limit
- Investment: You invest ¥2 million in stocks using your Growth allowance. Your remaining lifetime limit is now ¥16 million.
- Growth: Over a few years, your stocks grow in value to ¥3 million.
- Sale: You sell all of these stocks for ¥3 million. The ¥1 million profit is completely tax-free.
- Limit Reinstated: In the next calendar year, the original ¥2 million principal is added back to your available lifetime limit. You did not “lose” this portion of your ¥18 million limit by selling.
This makes the NISA incredibly flexible, allowing you to rebalance your portfolio or take profits without being permanently penalized on your lifetime tax-free allowance.
Breaking Down the Limits: Annual & Lifetime
Understanding how the different limits interact is key to maximizing your NISA.
-
Total Annual Limit: ¥3.6 million
This is the absolute maximum you can invest across both allowances in a single calendar year. It’s composed of two parts that can be used simultaneously:
- Tsumitate Allowance: ¥1.2 million per year.
- Growth Allowance: ¥2.4 million per year.
-
Total Lifetime Limit: ¥18 million
This is the maximum principal you can have invested in your NISA at any one time. Crucially, there’s a sub-limit: a maximum of ¥12 million of this lifetime limit can be used for the Growth allowance.
What does this mean? To reach the full ¥18 million lifetime limit, you must invest at least ¥6 million using the Tsumitate allowance. You cannot fill the entire ¥18 million using only the Growth allowance.
How Investment Gains Affect Your Limits (A Key Concept)
A common and crucial question is whether profits from your investments use up your NISA allowance. The answer is a clear no. The annual and lifetime limits are based only on the principal amount (the money you put in), not the account’s value after it has grown.
This is the core power of the NISA: your principal investment secures a tax-free space, and any growth within that space is yours to keep, without penalty.
Real-Life Examples & Strategies
Example 1: Yuki, The Beginner (28 years old)
By starting early, even with a modest amount, Yuki leverages the power of compound growth in a tax-free environment for decades.
Example 2: The Tanakas, A Young Family (35 years old)
- Goal: Aggressively save for retirement while also building a fund for their child’s future university costs.
- Strategy: Max out the Tsumitate allowance for a stable base and use the Growth allowance for extra investments.
-
Action:
- Mr. Tanaka: Sets up a ¥100,000/month investment (totaling ¥1.2 million/year) in a Tsumitate-eligible S&P 500 index fund.
- Mrs. Tanaka: Also sets up a ¥100,000/month investment (totaling ¥1.2 million/year) in a different Tsumitate-eligible global index fund to diversify.
- Growth Investment: They use part of their combined yearly bonus to make a ¥800,000 lump-sum investment in a technology-focused ETF using Mr. Tanaka’s Growth allowance.
- Breakdown:
- Combined Annual Investment: (¥1.2M + ¥1.2M) + ¥0.8M = ¥3.2 million
- Path to Maxing Out: Together, they are investing heavily toward their combined lifetime limit of ¥36 million (¥18M each). At this pace, they will reach that limit in about 11 years, putting them in an excellent position for retirement.
Example 3: Kenji, The Experienced Investor (45 years old)
- Goal: Maximize wealth creation for a comfortable, potentially early, retirement.
- Strategy: Max out the full ¥3.6 million annual limit.
-
Action:
- Tsumitate: Kenji automates ¥100,000/month (¥1.2 million/year) into a Tsumitate fund to build a solid, diversified base.
- Growth: He actively manages the remaining ¥2.4 million/year himself, investing in a mix of individual Japanese blue-chip stocks and some US tech stocks he has researched.
- Breakdown:
- Annual Investment: ¥1.2M (Tsumitate) + ¥2.4M (Growth) = ¥3.6 million
- Path to Maxing Out: Kenji is on the fastest possible track. He will fill his entire ¥18 million lifetime limit in just 5 years (¥18M / ¥3.6M per year). After that, he can let his investments grow tax-free indefinitely or sell and reuse the limit as his strategy changes.
Example 4: Haruka, Nearing Retirement (58 years old)
Important Considerations & Caveats
- No Loss Offsetting: Losses incurred in a NISA account cannot be used to offset gains in a regular, taxable brokerage account.
- Foreign Withholding Tax: For dividends from foreign stocks (e.g., Apple, Microsoft), the foreign country (e.g., the US) will still levy a withholding tax (typically 10%). This tax cannot be reclaimed through Japan’s foreign tax credit system when the stock is held in a NISA account. The Japanese portion of the tax is, however, waived.
- Residency: You must be a resident of Japan to open and contribute to a NISA account. If you cease to be a resident, you will generally need to close your account.
- One Account Rule: You can only have one NISA account at any given time. You can, however, change your financial institution once per year.
Frequently Asked Questions (FAQ)
Q1: What happens to my old NISA account (from before 2024)?
Your old NISA account is completely separate from the new 2024 NISA. You can no longer add money to the old accounts. However, the assets inside will remain tax-free for their original designated period (5 years for General NISA, 20 years for Tsumitate NISA). Once that period expires, you must either sell the assets or move them to a regular taxable account. You cannot move assets from an old NISA to the new NISA.
Q2: I'm a foreign national (e.g., from Bangladesh) living in Japan. Can I use NISA?
Yes, absolutely. Eligibility for NISA is based on your residency status in Japan, not your nationality. As a legal resident of Japan (with a valid residence card and My Number), you can open and use a NISA account under the same rules as a Japanese citizen.
### Tax in Japan
All profits (capital gains and dividends) from investments inside your NISA account are tax-free in Japan.
### Tax in Bangladesh
This is a key consideration. Japan and Bangladesh have a Double Taxation Avoidance Agreement (DTAA). Generally, this treaty states that capital gains from selling assets like stocks and funds are taxable only in the country where the seller resides. Since you reside in Japan and the gains are tax-free under NISA, they should not be taxed by Bangladesh.
### Remitting money home
Sending your investment profits from Japan to Bangladesh is typically considered a remittance and is not taxed as income. However, once that money is in a Bangladeshi bank and starts generating its own income (like interest), that new income would be subject to Bangladeshi tax laws.
> **WARNING !**
> Tax laws are complex and can change. This information is for general guidance only. It is highly recommended that you consult with a professional tax advisor who is familiar with both Japanese and Bangladeshi tax regulations to confirm your personal situation before investing.
Q3: What happens if I leave Japan permanently?
If you are no longer a resident of Japan, you must close your NISA account. This typically involves selling all the assets within the account. You cannot maintain a NISA account as a non-resident.
Q4: Can I contribute more than ¥3.6 million in a year if I didn't use my full allowance last year?
No. The annual investment limit of ¥3.6 million does not carry over. If you only invest ¥1 million in one year, you do not get an extra ¥2.6 million to invest the following year. The limit resets to ¥3.6 million each calendar year.
Q5: What happens if my investments lose value?
If the value of your investments drops, there is no immediate impact on your NISA limits. However, it's important to remember the "no loss offsetting" rule. If you sell an asset for a loss inside your NISA, you cannot use that loss to reduce your taxable capital gains on investments outside of your NISA.
Q6: Which brokerage should I choose for my NISA account?
The best choice depends on your needs. The most popular online brokers in Japan (like SBI Securities and Rakuten Securities) are often recommended due to their wide selection of products (especially for the Growth allowance), low fees, and user-friendly platforms. Consider factors like which funds you want to buy, ease of use, and integration with any bank accounts you already have.
References
⬆ back to top