Comprehensive guide to Indian tax terminology - 45+ terms explained
Showing 45 terms
Section 80C allows deduction of up to ₹1.5 lakh from taxable income for investments in specified instruments like PPF, EPF, ELSS, NSC, life insurance premiums, home loan principal repayment, tuition fees, and 5-year bank FDs.
Example:
If you invest ₹1.5 lakh in PPF, your taxable income reduces by ₹1.5 lakh.
Tax paid in installments during the financial year if your tax liability exceeds ₹10,000. Payable in 4 installments: 15% by Jun 15, 45% by Sep 15, 75% by Dec 15, 100% by Mar 15.
Example:
If your total tax liability is ₹1 lakh, you must pay advance tax quarterly instead of paying all at year-end.
Total income from all sources including salary, business, rental income, capital gains, and other sources before applying deductions.
Example:
Salary ₹8L + rental income ₹2L + FD interest ₹50,000 = aggregate income ₹10.5L.
Income from agricultural land in India. Fully exempt from tax but included in total income to determine applicable tax slab.
Example:
₹2 lakh agricultural income is exempt but impacts your tax bracket calculation.
The year in which income earned in the previous financial year is assessed and tax is paid. Format: AY 2025-26 means income earned in FY 2024-25. Note: Under the Income Tax Act 2025 (effective April 1, 2026), the concepts of Assessment Year and Previous Year are replaced by a single "Tax Year" concept.
Example:
For income earned from April 2024 to March 2025 (FY 2024-25), you file ITR in AY 2025-26. From Tax Year 2026-27 onwards, only "Tax Year" will be used.
Income level below which no income tax is payable. For FY 2025-26: ₹2.5 lakh (old regime general), ₹4 lakh (new regime). Under Income Tax Act 2025, ₹4 lakh under new regime for Tax Year 2026-27.
Example:
If your income is ₹2.4 lakh and you're under 60, you pay zero tax.
Additional tax levied on total tax amount. Currently 4% Health & Education Cess applies on income tax + surcharge.
Example:
Tax of ₹50,000 + cess of ₹2,000 (4%) = total ₹52,000.
Share of profits distributed by companies to shareholders. Fully taxable in hands of recipient at applicable slab rates from FY 2020-21.
Example:
Dividend income of ₹50,000 is added to your total income and taxed as per your slab.
Period from April 1 to March 31 for which income is earned and tax is calculated. Under the Income Tax Act 1961: called "Financial Year" (FY). Under the Income Tax Act 2025 (effective April 1, 2026): renamed to "Tax Year", replacing both FY and AY with a single concept.
Example:
FY 2025-26 (Apr 2025 to Mar 2026) is the last year under the old Act. Tax Year 2026-27 (Apr 2026 to Mar 2027) is the first year under the Income Tax Act 2025.
Annual tax statement showing all TDS deducted, advance tax paid, and self-assessment tax paid in your name. Available on income tax portal.
Example:
Form 26AS shows TDS of ₹80,000 deducted by employer and ₹5,000 by bank on FD interest.
Lump sum payment by employer to employee on retirement/resignation after 5 years of service. Exempt up to ₹20 lakh or as per formula (whichever is lower).
Example:
Gratuity of ₹15 lakh on retirement is fully tax-exempt.
Sum of all income from salary, house property, business, capital gains, and other sources before claiming deductions under Chapter VI-A.
Example:
Salary ₹10L + rental ₹2L + FD interest ₹50,000 = GTI ₹12.5L.
The new income tax law replacing the Income Tax Act 1961, effective from April 1, 2026 (Tax Year 2026-27). Simplifies 819 sections to 536, replaces "Previous Year" and "Assessment Year" with a single "Tax Year" concept, and consolidates the tax code. Tax rates and slabs remain the same as FY 2025-26.
Example:
From Tax Year 2026-27, you will file taxes under the Income Tax Act 2025 instead of the Income Tax Act 1961.
Form filed to report income, calculate tax, and claim refunds. Different ITR forms (ITR-1 to ITR-7) for different taxpayer categories.
Example:
Salaried individual with income under ₹50 lakh files ITR-1.
Simplified ITR form for individuals with income up to ₹50 lakh from salary, one house property, and other sources (interest, etc.).
Example:
If you have only salary income of ₹8 lakh and bank interest, file ITR-1.
For individuals/HUFs with income from salary, house property, capital gains, and other sources but not from business/profession.
Example:
If you sold stocks or have multiple house properties, file ITR-2.
Tax exemption for travel expenses within India during leave. Maximum 2 trips in 4-year block. Only travel cost exempt (not hotel, food).
Example:
Flight tickets of ₹30,000 for family vacation in India can be claimed as LTA.
Default tax regime with lower tax rates but no deductions (except ₹75K standard deduction, employer NPS). FY 2025-26 / Tax Year 2026-27 slabs: ₹0-4L (nil), ₹4-8L (5%), ₹8-12L (10%), ₹12-16L (15%), ₹16-20L (20%), ₹20-24L (25%), >₹24L (30%). Rebate makes income up to ₹12.75L tax-free for salaried.
Example:
Salaried income ₹12L → standard deduction ₹75K → taxable ₹11.25L → rebate covers full tax → ₹0 payable.
Government-backed fixed deposit for 5 years with guaranteed returns (~7-8%). Investment qualifies for Section 80C deduction up to ₹1.5 lakh.
Example:
Investing ₹1 lakh in NSC gives 80C deduction and assured returns.
10-character alphanumeric identifier issued by Income Tax Department. Mandatory for filing ITR, financial transactions above specified limits.
Example:
PAN card format: ABCDE1234F (5 letters, 4 numbers, 1 letter).
Tax paid by taxpayer after accounting for TDS and advance tax before filing return. Paid when tax liability exceeds TDS/advance tax.
Example:
Total tax ₹1L, TDS ₹80,000 → pay ₹20,000 as self-assessment tax before filing ITR.
Additional tax on high-income earners. Applicable when income exceeds ₹50 lakh. Ranges from 10% to 37% based on income level.
Example:
Income ₹60L → 10% surcharge on base tax amount.
New unified term introduced by the Income Tax Act 2025, replacing both "Financial Year" (Previous Year) and "Assessment Year". A Tax Year runs from April 1 to March 31. The first Tax Year under the new Act is 2026-27 (April 1, 2026 to March 31, 2027).
Example:
Tax Year 2026-27 replaces both "FY 2026-27" and "AY 2027-28" under the new Income Tax Act 2025.
Tax deducted by payer before making payment. Employer deducts TDS on salary, banks on FD interest (above ₹40,000), etc. Shown in Form 26AS.
Example:
FD interest ₹50,000 → bank deducts 10% TDS = ₹5,000.
Certificate issued by deductor showing TDS amount deducted. Form 16 (salary), Form 16A (other than salary).
Example:
Employer issues Form 16, bank issues Form 16A for FD interest TDS.