You need to know the difference between gross income, revenue and capital
If you don't', you'll face severe tax
consequences. One consequence will be SARS taxing you at the wrong tax
rate. This in turn will result in penalties, interest and possibly an audit by SARS.
But you don't have to worry too much.
I'm going to show you the difference between the three, so you'll always know what to include as gross income.
The key difference between gross income, capital and revenue
What is gross income?
Gross income is the basis to calculate the normal tax
payable. It's the money you earn before you take off any deductions and exclude any exempt income.
But be careful, you must receive or accrue an amount before you can include it in your gross income. This doesn't just include money, but also the value of every type of property or asset you have, which has a monetary value, and is not capital in nature.
What is revenue?
Revenue (or turnover) is income your company receives from its normal business activities. It's usually from the sale of goods and services to customers.
What is capital?
Capital is money you use to buy items you need to make your products or to provide your services to your clients.
Now all you have to do is, determine if an amount falls within your gross income.
There are 13 ways to determine if an amount falls within your gross income. In the Practical Tax Loose Leaf you'll find everything you need to make sure you can include an amount as gross income.