TAX3701 Assignment 1 (Taxation) EXAM
STUDY GUIDE 2025/2026 COMPLETE
QUESTIONS & CORRECT DETAILED
ANSWERS || GUARANTEED PASS <LATEST
UPDATE>
**Questions & Detailed Answers**
**Question 1:**
What is the fundamental structure of the South African income tax system as it applies to
individuals?
**Answer:**
The South African income tax system for individuals is a **progressive (or graduated) tax
system**. This means that the rate of tax increases as the taxpayer's taxable income increases.
It is also based on the concept of **residency**. South African residents are taxed on their
worldwide income (subject to certain exclusions and exemptions), while non-residents are taxed
only on income from a South African source.
**Question 2:**
Define "gross income" as per Section 1 of the Income Tax Act.
**Answer:**
"Gross income" is defined in Section 1 as **the total amount, in cash or otherwise, received by
or accrued to or in favour of a resident**, during a year or period of assessment, **excluding
receipts and accruals of a capital nature**. For non-residents, it is the total amount from a
South African source, also excluding capital amounts.
, **Question 3:**
What is the critical difference between "received by" and "accrued to" in the definition of gross
income?
**Answer:**
* **"Received by"** refers to the **actual receipt** of an amount, i.e., when it is in the
taxpayer's possession or control (cash basis).
* **"Accrued to"** refers to the **unconditional right** to receive an amount. The income is
included when the taxpayer has a claim enforceable by law, even if it hasn't been physically
received yet (accrual basis).
**Question 4:**
What is the "general deduction formula" found in Section 11(a) of the Income Tax Act, read with
Section 23(g)?
**Answer:**
Section 11(a) allows for the deduction of **expenditure and losses actually incurred in the
production of income**, provided such expenditure and losses are **not of a capital nature**.
Section 23(g) disallows any deductions for expenses that are **not laid out for the purposes of
trade**.
**Question 5:**
List the three requirements that must be simultaneously met for an expense to be deductible
under Section 11(a).
**Answer:**
1. The expenditure or loss must have been **actually incurred**.
2. It must have been incurred **in the production of income**.
3. It must be **not of a capital nature**.
**Question 6:**
STUDY GUIDE 2025/2026 COMPLETE
QUESTIONS & CORRECT DETAILED
ANSWERS || GUARANTEED PASS <LATEST
UPDATE>
**Questions & Detailed Answers**
**Question 1:**
What is the fundamental structure of the South African income tax system as it applies to
individuals?
**Answer:**
The South African income tax system for individuals is a **progressive (or graduated) tax
system**. This means that the rate of tax increases as the taxpayer's taxable income increases.
It is also based on the concept of **residency**. South African residents are taxed on their
worldwide income (subject to certain exclusions and exemptions), while non-residents are taxed
only on income from a South African source.
**Question 2:**
Define "gross income" as per Section 1 of the Income Tax Act.
**Answer:**
"Gross income" is defined in Section 1 as **the total amount, in cash or otherwise, received by
or accrued to or in favour of a resident**, during a year or period of assessment, **excluding
receipts and accruals of a capital nature**. For non-residents, it is the total amount from a
South African source, also excluding capital amounts.
, **Question 3:**
What is the critical difference between "received by" and "accrued to" in the definition of gross
income?
**Answer:**
* **"Received by"** refers to the **actual receipt** of an amount, i.e., when it is in the
taxpayer's possession or control (cash basis).
* **"Accrued to"** refers to the **unconditional right** to receive an amount. The income is
included when the taxpayer has a claim enforceable by law, even if it hasn't been physically
received yet (accrual basis).
**Question 4:**
What is the "general deduction formula" found in Section 11(a) of the Income Tax Act, read with
Section 23(g)?
**Answer:**
Section 11(a) allows for the deduction of **expenditure and losses actually incurred in the
production of income**, provided such expenditure and losses are **not of a capital nature**.
Section 23(g) disallows any deductions for expenses that are **not laid out for the purposes of
trade**.
**Question 5:**
List the three requirements that must be simultaneously met for an expense to be deductible
under Section 11(a).
**Answer:**
1. The expenditure or loss must have been **actually incurred**.
2. It must have been incurred **in the production of income**.
3. It must be **not of a capital nature**.
**Question 6:**
