Summary
SUMMARY EXPLANATION OF GROSS INCOME AND SSPECIAL INCLUSION
- Course
- Taxation (STX4000)
- Institution
- University Of Venda (UNIVEN)
THIS SUMMARY EXPLAIN GROSS INCOME DEFINITION AND HOW TO CERTAIN PARAGRAPH OVERRULE MAIN DEFINITION
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Summary of gross income and special inclusionINTRODUCTION
The starting point of any INCOME TAX calculation is Gross Income (hereafter “GI”).
When a person does not have GI such person will not pay tax; therefore the
Gross Income definition is central to the whole of the Income Tax Act (hereafter
the Act). There is a very big difference between gross income and income. Please
ensure you understand the difference. This becomes important in terms of theory
as well as calculations.
Section 1 of the act defines gross income as: “In relation to any year or
period of assessment, means—
(I) In the case of any resident, the total amount, in cash or otherwise, received
by or accrued to or in favour of such resident; or
(ii) In the case of any person other than a resident, the total amount, in cash or
otherwise, received by or accrued to or in favour of such person from a source
within the Republic, during such year or period of assessment, excluding receipts
or accruals of a capital nature”
1. Total amount
Amount:
Everything that can be measured in a money value (thus if it is not money, if it can
be measured in money value it will constitute amount). The Commissioner has to
establish the amount (if not available).
2. Cash or otherwise
Or otherwise
As long as the amount has a money value AND can be converted into money, thus
Gross Income. If the receipt is not a money form. We use the value at the DATE OF
RECEIPT normally Market value
3. Received or accrued …. a person
Relates to timing of receipt – establish tax year in which gross income arises.
EITHER receipt OR accrual – NOT TWICE – thus whatever happens FIRST (earlier of
receipt or accrual). Disposal subsequent to receipt or accrual is IRRELEVENT, thus
does not matter what the person does with the gross income; he will be taxable at
the earlier of receipt or accrual.
RECEIVED
Received on OWN behalf and for OWN benefit.
ACCRUED
Unconditionally entitled to – thus all the conditions must be met.
4. From worldwide receipts (in case of resident), or from South African source (in
case of non-resident)
RESIDENT
Defined in section 1 of the Act
Ordinarily resident – true home in SA
Physical presence – days test (91 days in current, and 91 days in each of
five preceding years of assessment and total of 915 days in preceding 5
years)
5. NOT of a capital nature
Specifically excluded from gross income. Meaning not subject to normal tax BUT
subject to CAPITAL GAINS TAX
As the above gross income definition exclude receipt and accruals of capital in
nature. However there are certain gross income paragraphs that specifically
include those capital receipt and accrual listed on para (a) to (n) of the income tax
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