Advance ruling is like getting a clear answer in advance about how much tax you need to pay for a specific business transaction. It helps you avoid surprises and uncertainty when it comes to taxes.
Under this, individuals or businesses in India work out the tax on the estimated income they will earn in a financial year and pay the total tax in instalments as per the timeline prescribed.
This is the money you make from farming in India. It includes profits from cultivating the land.
AMT is an extra tax that some individuals in India might have to pay. It is applied when their regular income tax is less than the AMT they owe on their adjusted total income.
This is the extra tax you have paid because of the alternative minimum tax (AMT), which is more than the regular tax you owe.
The annual information statement, often called AIS, is like a detailed report card for taxpayers in India. It is a document showing everything about your money for a year. This includes how much you earned, what you spent or saved, and even any tax-related matters.
Anonymous donation is when someone gives money or items without the recipient keeping a record of the donor’s personal information, like name and address, as required by regulations; however, the Government made some strict rules to tax such anonymous donations.
An appeal is a way for someone (like a taxpayer or Government) who disagrees with a decision made by a tax or legal authority to ask a higher legal authority to review and possibly change that decision.
An arm’s length price is the fair price you would pay when buying or selling something to someone not closely related to you or your business. It is the price you would use in a regular, independent transaction.
According to the Income-tax Act in India, An assessee is responsible for paying taxes or any other amount. This term also applies to individuals for whom tax proceedings have been initiated. It includes three categories:(a)Regular Assessee: The person or entity obligated to pay taxes, such as income tax. (b)Deemed Assessee: Even if you are not the primary taxpayer, you might be considered a deemed assessee if you are indirectly involved in a financial transaction subject to taxation.(c)Assessee-in-Default:If a person or entity fails to pay the required taxes, they are referred to as an assessee-in-default.
This term means someone who has not fulfilled their responsibilities per the Income-tax Act. This can include not submitting their income tax return, not paying or depositing taxes when required, and other similar failures.
An assessing officer, often referred to as AO, is a government official responsible for evaluating and determining the tax liabilities of individuals and businesses under the Income-tax Act in India. The AO can be various ranks of tax officials like assistant commissioner, deputy commissioner, assistant director, deputy director, or income-tax officer, depending on their jurisdiction.
Assessment is when the Income-tax department reviews your income-tax return. They check to ensure you have reported your income correctly and paid the right amount of tax. It is like a financial checkup for your taxes.
This refers to 12 months starting on April 1st each year.
This is when you file your income tax return after the original due date has passed.
Best judgement assessment is when the tax authority estimates an individual’s taxable income using the information available, especially when the taxpayer is uncooperative or when the actual profit cannot be determined from the taxpayer’s maintained financial records.
Books of accounts refer to all the records where a business or individual keeps track of their financial transactions. These records can be physical (like paper ledgers) or digital (stored on computers or devices like floppy disks). They include various books, such as ledgers, day books, cash books, and account books. These records help in maintaining financial clarity and compliance.
A capital asset is something you own, like property or investments, that is not directly related to your business or profession. It can be different types of possessions:(a)A house or land that you own, even if it is not related to your job.(b)Stocks or bonds that a Foreign Institutional Investor (FII) holds, following the rules set by the SEBI (Securities and Exchange Board of India).(c)An insurance policy linked to investments does not qualify for tax exemption under Section 10(10D) due to certain conditions, like high premiums and being equity-oriented.
This is like saving your financial losses for later. When a business or person has losses in one year and has not fully exhausted their income as per rules, they can use them to reduce the taxes they must pay when making a future profit. It is like carrying over a debt or loss from one year to the next. One of the conditions for taking carry forward of any losses is timely filing Income returns.
Charitable purpose refers to activities or objectives that aim to benefit the greater good of society or the public. In India, according to Section 2(15) of the Income-tax Act, charitable purposes include:Relief of Poor: Assisting individuals or communities in financial need.Education: Supporting educational initiatives and institutions.Yoga: Promoting yoga practices for the well-being of individuals.Medical Relief: Offering healthcare services and aid to those in need.Preservation of the Environment: Protecting natural resources like watersheds, forests, and wildlife.Preservation of Monuments or Places of Interest: Safeguarding historical or artistic landmarks.Advancement of General Public Utility: Activities that benefit the public without profit motive.
This is like having a liability on the occurrence of an event. It is a situation where you might have to pay money in the future, but it is not sure. It depends on something happening or not happening.
Corpus donation refers to voluntary contributions from a charitable or religious trust or institution. These contributions are specifically meant to be part of the core or permanent funds of the trust or institution.
CII is a number declared by India’s Central Board of Direct Taxes (CBDT) annually. It is an essential tool for calculating long-term capital gains or losses when the cost of acquiring or improving an asset needs to be adjusted for inflation based on the CII of the relevant year.
This term refers to the total expenses of buying a capital asset, like a property or an investment. It includes the price you paid for the asset and any additional costs related to acquiring it.
A deductee is someone from whom tax is taken out (deducted) as per the rules of the Income-tax Act.
A deductor is a person or entity responsible for deducting a certain amount of tax from payments they make to others, as mandated by the Income-tax Act in India.
A deemed assessee is a term used in taxation. It refers to a person responsible for assessing another individual or entity’s income, loss, or refund.
A deemed dividend is like an imaginary dividend. It is not actual cash given to shareholders but treated as if it is. There are several situations where this can happen:(a)When a company gives away its assets.(b)When a company gives out debentures or deposit certificates.(c)When a company gives bonus shares to preferred shareholders.(d)When a company is closing down and distributing its assets.(e)When a company reduces its capital and distributes it.(f)When a company loans money to its shareholders.
A dividend is like a company’s reward to its shareholders. It is a portion of the profit that the company shares with the people who own its stock.
DTAA is an agreement between the Indian government and foreign countries or specified territories. It is designed to prevent people or businesses from being taxed twice on the same income.
An eligible startup is a type of company or limited liability partnership (LLP) that meets specific requirements outlined in Section 80-IAC.
FTS refers to payments made for receiving managerial, technical, or consultancy services, including personnel services.
FTC is like getting a discount on your Indian taxes for taxes you have already paid in another country. It helps you avoid paying taxes twice on the same income.
Form 26AS is like a tax summary for individuals. It keeps a record of:TDS (Tax Deducted at Source): Whenever you earn money, sometimes a portion is taken out as tax before you receive it. Form 26AS shows how much of your income was deducted as tax by others.TCS (Tax Collected at Source): If you sell certain things, you might need to collect tax from buyers. This form also includes those details.Advance Tax: If you pay your taxes in advance instead of all at once, form 26AS shows those payments.Self-Assessment Tax: This is the tax you calculate and pay yourself. The form keeps track of these payments, too.Other Tax Payments: Any other types of taxes you have paid, it records them.Tax Refunds: This form lists those refunds if you have overpaid your taxes and received money back.In simple terms, it is like your tax history book, showing what you owe and what you have paid. It is essential for filing your income tax returns.
An impermissible avoidance arrangement in finance refers to a situation where the primary purpose is to gain a tax advantage, and the following criteria can identify it:(a)It involves creating rights or obligations that would not typically exist between unrelated parties.(a)It leads, either directly or indirectly, to the improper or excessive use of tax laws.(a)It lacks natural economic substance, either entirely or in part, as determined by Section 97 of the Income-tax Act, 1961.(a)It is executed or conducted in a way that does not align with regular, genuine business practices.
ICDS, or Income Computation and Disclosure Standards, are guidelines set by the Indian Government through Section 145(2) of the Income-tax Act, 1961.
Income tax is a tax that the Indian Government collects from individuals and businesses based on their earnings or income.
The Income Tax Appellate Tribunal, often called ITAT, is like a special court for income tax matters in India.
Income escaping assessment, or reassessment, is like a second look by the tax authorities at your income tax returns.
Interest refers to the additional money you have to pay when you borrow or take on debt.
An international transaction refers to any business exchange or interaction between two or more connected companies, where at least one is based outside.
A company buys this type of life insurance policy on the life of its essential employees, like top managers or critical decision-makers.
A legal representative, in the context of Indian law, is a person who stands in place of someone else in legal matters.
Liable to tax means that a person is obligated to pay income tax according to the current laws of a specific country.
A long-term capital asset generally refers to an asset that a person or entity holds for more than 36 months or three years before selling. However, there are some exceptions:(a)Unlisted Shares (equity or preference shares) and Immovable Property (like land or buildings) are considered long-term if held for more than 24 months or two years before being sold.(b)Listed Shares (equity or preference shares), Listed Securities (debentures, bonds, derivatives), Units of UTI (whether listed or unlisted), Units of Equity-Oriented Funds (listed or unlisted), and Zero Coupon Bonds (listed or unlisted) are treated as long-term capital assets if held for more than 12 months or one year before selling.
Long-term capital gains refer to the profit you make when you sell something valuable that you have owned for a while.
The Maximum Marginal Rate (MMR) is the highest rate of income tax that applies to the topmost income bracket for individuals, Associations of Persons (AOP), or Bodies of Individuals (BOI).
Minimum Alternate Tax (MAT) is a rule in the Indian Income-tax Act that ensures companies pay a minimum level of tax based on their book profits.
MAT Credit is a tax credit you can use when your company pays more Minimum Alternate Tax (MAT) than it would under regular tax rules.
Misreporting of income means giving incorrect or untrue information to the tax authorities.
According to the Income-tax Act, a non-resident is not considered a resident in India.
A penalty is like a fine imposed by the tax authorities when someone does not follow the rules in the Income-tax Act.
Permanent Account Number (PAN) is a unique ten-character combination of letters and numbers.
An employee gets something extra besides their regular salary or wages.
In legal terms, a person can be anyone or anything with legal recognition. This includes:Individual: You, as an individual, are a person.Company: Businesses like Tata Motors or Infosys are considered persons under the law.Hindu Undivided Family (HUF): A family that follows Hindu law and shares income collectively.Local Authority: Municipalities or city councils are examples of local authorities.Associations or Groups: Clubs, societies, or groups formed for a common purpose.Artificial Juridical Person: Entities like temples, charities, or trusts that have legal status but are not individuals or companies.
Previous year refers to the financial year just before the assessment year.
Profits in lieu of salary refers to any extra money you receive apart from your regular salary or wages from your employer.
Prosecution means taking legal action against a person or taxpayer who has broken the rules set by the Income-tax Act.
A public charitable trust is a legal entity set up for the benefit of the general public.
Receipts are money or funds that come into your possession or business. They are divided into two main types:Revenue Receipts: These funds regularly flow into your business as a part of its normal operations. Examples include money from selling goods or services, interest income from loans, and rent from properties.Capital Receipts: These funds do not come from your regular business activities but typically result from selling long-term assets or investing. Examples include money from selling land, buildings, machinery, or investments like stocks.
Rectification is like a correction tool used by the Income-tax authorities in India. It allows them to fix errors or mistakes made in their previous decisions. The tax authorities can initiate these corrections when the taxpayer points out a mistake
This term refers to a person’s legal status regarding their stay and tax obligations in India. It depends on several factors:(a)Period of Stay in India in the Current Year: If a person has spent a certain amount of time in India during the current year, they may be considered a resident.(b)Period of Stay in India in Previous Years: Previous stays in India can also influence one’s residential status. (c)Whether the assessee is liable for tax in any other country: If a person is also subject to tax obligations in another country, this can affect their residential status in India.(d)Other conditions, as specified in Section 6: The specific conditions mentioned in Section 6 of the relevant tax laws, can also impact a person’s residential status.
This is like a report card you send to the Government about how much money you earned and how much tax you need to pay. It is a way to declare your income officially.
A revised return is like a do-over for your taxes. You file a new tax return to fix any mistakes or missing information from your original return.
Scrutiny assessment is like a detailed checkup of your income tax return. The Government wants to ensure you have not hidden any income or paid too little tax. During this process, you can show proof that what you declared on your tax return is accurate.
This means figuring out how much income tax you owe on your own. You do this after March 31st but before you file your income tax return.
A senior citizen in India is a person who is 60 years or older during the past year but is less than 80 years old on the last day of that year.
Set off of losses means using losses from one source of income to reduce the taxable profit from another source of income.
A short-term capital asset in India is typically an asset that is held for no more than 36 months before it is sold or transferred. However, there are some exceptions to this general rule:Unlisted Shares and Immovable Property: Unlisted shares of a company (equity or preference shares) and immovable property (land or buildings) are considered short-term capital assets if held for no more than 24 months or two years before being transferred.Listed Financial Instruments: Listed shares (equity or preference), listed securities (debentures, bonds, derivatives, etc.), units of UTI (Unit Trust of India), units of equity-oriented funds (whether listed or unlisted), and zero-coupon bonds (whether listed or unlisted) are regarded as short-term capital assets if they are held for no more than 12 months or one year before being transferred.
Short-term capital gains refer to the profit made when selling a short-term asset.
Significant economic presence refers to two main criteria:Monetary Transactions: If a non-resident engages in transactions involving goods, services, property, or software with individuals or entities in India, and the total value of these transactions in a year exceeds ₹2 crores, it qualifies as a significant economic presence. For instance, if a foreign company sells software to Indian customers and the total sales in a year amount to more than ₹2 crores, it falls under this category.Online Presence: It also includes situations where a non-resident systematically and continuously conducts business activities or interacts with at least 3 lakh users in India. For example, suppose a foreign e-commerce platform consistently targets Indian consumers and maintains an ongoing relationship with over 3 lakh users. In that case, it meets the significant economic presence criteria.
A speculative transaction is when people make agreements to buy or sell things like goods, stocks, or shares, but they do not exchange physical items or papers. Instead, they settle the deal without physically handing over the goods or documents.
Stamp duty value is the amount determined by the Central or State Government for calculating the stamp duty on a property. This value assesses the tax you must pay when you buy or transfer property ownership.
SFT is a way for specific organisations to share details about significant financial dealings with the Indian Income Tax Department. These reports help the tax authorities keep track of financial activities to ensure tax compliance.
Summary assessment is when the Centralised Processing Centre (CPC) handles the processing of tax returns. During this process, the CPC automatically checks the accuracy of calculations, deductions claimed, and other related details on the tax return.
A super-senior citizen is a person who is 80 years old or older at any point during the previous year.
Tax Collected at Source, often abbreviated as TCS, is a type of tax that specific individuals or businesses must collect from the person buying their goods or services. It is like a small amount of tax collected by the seller on behalf of the Government.
TDS is a small tax payment made in advance. When you receive certain types of income, like your salary or interest on your bank savings, the payer deducts a small portion of that money as tax before giving it to you. This deducted tax is then sent to the Government on your behalf.
A TDS Certificate is a document given by a person or entity that deducts tax from your income before paying it to you. This certificate shows the amount of tax deducted, the tax rate, and other essential details about your taxes.
A TDS Return is like a tax report that someone, usually a business or an employer, has to submit to the Government. This report lists all the times they deducted a portion of your income as tax during three months. It is a way for the Government to track how much tax is being collected.
TAN is a 10-digit alphanumeric identification number that individuals or entities in India must obtain if they are responsible for deducting or collecting taxes on payments made. It is a unique identifier provided by the Income Tax Department.
The total income of an individual includes all the money they earn or are considered to have earned in India during a specific year. This includes income they receive directly, income that is considered to have been received, and income that is generated or considered to have been generated in India.
Transfer pricing refers to determining the prices at which goods, services, or assets are exchanged between companies or entities that are related or have a close business connection. The main goal is to ensure these transactions occur at a fair and market-based price, similar to what would be agreed upon between two unrelated businesses.
Underreporting of income refers to when someone intentionally or unintentionally declares less income or fails to declare any income on their income tax return. This can result in legal consequences and penalties. It is regulated by Section 270A of the Income-tax Act.
A ULIP is like a two-in-one plan that helps you save money and provides insurance coverage at the same time. Here is how it works:Money Mix: When you pay for a ULIP, part of your money goes to insurance to protect you, and the rest goes into investments.Investment Choices: You get to decide where the investment part goes: stocks, bonds, or a mix of both. It depends on your financial goals and how much risk you are comfortable with.
This is a type of income tax return you can file even after the deadline for filing your original, belated, or revised tax return.
Virtual digital assets refer to various digital entities, often generated through cryptographic techniques, that represent value and can be exchanged electronically. These assets can serve as a store of value or a unit of account in digital transactions. However, they are distinct from Indian or foreign currencies. They include:(a)Information, code, numbers, or tokens created through cryptographic methods hold or represent value and can be used in financial transactions or investments.(b)Non-fungible tokens (NFTs) and similar tokens have unique properties and are not interchangeable one-to-one.(c)Any other digital assets specified by the Central Government through a notification in the Official Gazette. It is important to note that the Central Government can exclude certain digital assets from this definition through official notifications, subject to specific conditions.
Written Down Value (WDV) is the reduced value of an asset used to calculate depreciation. To find the WDV of an asset, subtract the actual cost of assets acquired in the previous year and the proceeds from any asset sales in that year from the initial value of the asset.
