Interest

What does Section 24J apply to?

• Any financial transaction

  
  

• Interest-bearing arrangements or debt instruments

• Non-interest-bearing loans

• Any income-generating activities

What is the purpose of Section 24J?

• To calculate taxable income for businesses

  
  

• To deduct capital expenses

• To include or deduct interest that accrues during the current year of assessment

• 
  To calculate gross profit for companies

Which of the following is not excluded from the definition of an income instrument under s24J(12)?

• Normal savings accounts

• Call account

• Instruments redeemable at any time

• Instruments issued at a discount or premium

A holder refers to a person obligated to repay any amounts under the terms of an instrument.

• TRUE

• FALSE

Mr. Z borrowed R100,000 from his cousin on 1 January 2025 to renovate his home. The agreement states that the loan is interest-free. Repayment must be made in full by 30 September 2025

Can Mr. Z deduct any amount under Section 24J(2)?

• YES

• NO

Answer explanation

Mr. Z cannot deduct any amount under Section 24J(2) because:

Interest-bearing arrangement: The loan is interest-free and therefore does not qualify as an instrument under Section 24J.

• Carrying on a trade: Renovating a home is not considered carrying on a trade or producing income.

Ms. Y acquired short-term bonds on 1 June 2025 with a face value of R250,000 issued at a discount of R50,000 redeemable on 31 March 2026. Coupon rate: 5% per annum. How much will she include in gross income in the 2026 year of assessment in terms of s24J (3) ?

• R10 000

• Rnil

Answer explanation

The term of the instrument is less than one year (1 June 2025 to 31 March 2026). For natural persons, the instrument must have a term exceeding one year to qualify.

On 1 January 2024, Company ABC Ltd. issued a 5-year bond with a face value of R500,000

Issued at a discount of 10%. Annual coupon rate: 8%. Redeemable at par value on 31 December 2028, coupon payments are made semi-annually. Calculate the Yield To Maturity for the bond.

• 10.68425%

• No solution

• 9.59956%

Answer explanation

PV = R450 000

FV= -R500 000

N= 5 x 2

PMT = (500 000 x 8%)

= R40 000

YTM = 9.59956%

On 1 December 2025 ABC (Pty) Ltd purchased 500 government bonds with a face

value of R100 each for a discount of 5% for investment purposes. The bonds have a

maturity date of 30 November 2028 when ABC (Pty) Ltd will receive R140 per bond.

ABC (Pty) Ltd has a 31 March year-end. The interest accrued in the 2026 YOA is apportioned as follows:

• 4/12 Months

• 121/365 days

• 4/6 months

• 121/182 days

On 1 July 2024, Mr. A borrowed R2,000,000 from a bank with an annual interest rate: 10% (compounded annually). The loan is repayable in 4 years at par, with irregular payments. Calculate the IRR (NPV)

• Year 1 (2025): R500,000

• Year 2 (2026) : Rnil

• Year 3 (2027): R700,000

• Year 4 (2028): R200,000

• 4.52764%

• No solution

• 10%

• 13.22087%

On 1 October 2024, XYZ Ltd. issued a 6-year bond with a face value of R1 000,000. Redeemable at a 5% premium on 30 September 2030 with a coupon rate: 9% per annum. Payments are made quarterly.

XYZ Ltd.’s financial year ends on 30 June 2025. Determine the interest accrued to XYZ in the 2025 YOA.

• 9.06452%

• R90 645.23

• R272 116

• R291 566