ARTICLE · 04 APRIL 2012

Section 24J: New Provisions Relating To Maturity Dates

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Section 24J of the Income Tax Act, 1962 (the "Act") is one of the more complicated sections of the Act.

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Mathabo Magolego

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Section 24J of the Income Tax Act, 1962 (the "Act") is one of the more complicated sections of the Act. It addresses the accrual and incurral of interest on "instruments". An instrument is any form of interest-bearing arrangement, whether in writing or not, but excluding any lease agreement.

An important factor in determining the accrual and incurral of interest on an instrument is the "yield to maturity" of the instrument. The yield to maturity is the rate of compound interest in each accrual period at which the present value of all amounts payable or receivable in relation to the instrument during the "term" of such instrument equals the issue price or transfer of the instrument. The term of the instrument ( that is, the period from the issue or transfer of the instrument to the date of redemption) is thus equally an important component to the yield to maturity formula.

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