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Income Tax Act, 1962 (Act No. 58 of 1962)

Chapter II : The Taxes

Part I : Normal Tax

24L. Incurral and accrual of amounts in respect of option contracts

 

(1)        For the purposes of this section—

 

"intrinsic value",

in relation to an option contract, means an amount equal to the difference between the market price or value of an asset, index, currency, rate of interest or any other factor, as provided for in the option contract, on the date of acquisition of the option contract and the pre-arranged price or value provided for in the option contract; and

 

"option contract"

means an agreement the effect of which is that any person acquires the option (excluding a foreign currency option contract as defined in section 24I(1))—

(a) to buy from or to sell to another person a certain quantity of corporeal or incorporeal things before or on a future date at a pre-arranged price; or
(b) that an amount of money will be paid to or received from another person before or on a future date depending on whether the value or price of an asset, index, currency, rate of interest or any other factor is higher or lower before or on that future date than a pre-arranged value or price.

 

(2)        The amount of—

(a) any premium or like consideration paid or payable by a person in terms of an option contract; or
(b) any consideration paid or payable by a person in respect of the acquisition of an option contract by such person;

shall for the purposes of this Act be deemed to have been incurred by such person on a day to day basis during the term of such option contract:

Provided that—

(i) where such option contract is exercised, terminated or is disposed of, the portion of the amount attributable to the period from the date of exercise, termination or disposal until the end of the original term of the option contract shall be deemed to have been incurred by such person on the date of exercise, termination or disposal of the option contract;
(ii) the provisions of this section shall not be applied to an option contract held by a person as trading stock;
(iii) where such amount includes an amount representing the intrinsic value in relation to the option contract, so much of such amount so representing the intrinsic value shall for the purposes of this Act be deemed to have been incurred by such person on the date of exercise, termination or disposal of the option contract.

 

(3) The amount of any premium or like consideration received or receivable by a person in terms of an option contract, other than an amount of a capital nature, shall for the purposes of this Act be deemed to have accrued to such person on a day to day basis during the term of such option contract: Provided that where such option contract is exercised, terminated or disposed of, the portion of the amount attributable to the period from the date of exercise, termination or disposal of such option contract until the end of the original term of the option contract shall be deemed to have accrued to such person on the date of exercise, termination or disposal of the option contract.

[Words preceding proviso of section 24L(3) substituted by section 45(1) of the Taxation Laws Amendment Act, 2018 (Act No. 23 of 2018), GG 42172, dated 17 January 2019 - effective 1 January 2019 (section 45(2)]