In the current environment where there is a huge amount of debt
being incurred by taxpayers it is useful to remind ourselves in
what general circumstances interest is deductible for income tax
purposes by taxpayers including companies that form part of a
banking group.
In this regard, the provisions of section 24J of the Income Tax
Act, 1962 (“Act”) regulate, amongst
others, the incurral or accrual of interest on financial
instruments. It enacts the principle that interest accrues on a
“yield to maturity” basis and applies to all
“instruments”, defined as including any
interest-bearing arrangement or debt.
Section 24J (2) of the Act deals with the deductibility of
interest. In particular, in terms of section 24J(2), interest is
deductible whether or not the interest is seen as capital in
nature.
