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Summary: The Income Tax Act, 1961, encompasses a range of terminologies that are crucial for understanding the tax system in India. This glossary provides definitions for various terms frequently used within the Act, offering clarity to taxpayers who may be unfamiliar with the legal language. Terms such as “Advance Tax,” “Assessee,” and “Assessment Year” define fundamental concepts of tax calculation and compliance. Definitions also cover “Return of Income,” outlining how taxpayers report their income, and “Assessment,” which details the process by which tax authorities review these reports. Key terms like “Penalty” and “Prosecution” describe the consequences of non-compliance, while “Agricultural Income” and “Capital Asset” help in classifying different types of income and properties. The glossary further includes terms like “Form 26AS” and “Tax Deducted at Source,” which are essential for understanding tax credits and deductions. By offering clear explanations of these terms, the glossary serves as a valuable resource for taxpayers, aiding them in navigating the complexities of the Income Tax Act and ensuring better compliance with tax obligations.
This document contains a list of definitions and words that are widely used in the Income Tax Act, 1961. It intends to provide definitions or explanations of the terminology used throughout the Act. Glossaries are very helpful for the taxpayers who are not familiar with the language and terminology used in the Act, as they can use the glossary to quickly look up and understand the unfamiliar terms.
| Advance tax | The scheme of advance tax requires every assessee to estimate his current income, and if tax liability on such estimated income exceeds the specified limit, the assessee is required to pay the estimated tax in instalments during the financial year itself. |
| Assessee | Assessee means a person liable for payment of taxes or any other sum of money under the Income-tax Act. It also includes the person for whom any proceeding has been initiated under the Income-tax Act. The term ‘assessee’ also includes ‘deemed assessee’ and ‘assessee-in-default’. |
| Assessment Year | Assessment Year means the period of twelve months commencing on the 1st day of April every year. |
| Previous Year | Previous Year means the financial year immediately preceding the assessment year. In the case of a business or profession newly set up or a source of income newly coming into existence in a financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or the date on which the source of income newly comes into existence and ending with the said financial year. |
| Return of income | Return of income is the format in which the assessee furnishes information related to his total income and tax payable. It is a declaration of income by the assessee in the prescribed format. |
| Assessment | The process of examining the return of income by the Income-tax department is called assessment. |
| Penalty | Penalty is a punitive action imposed by the tax authorities for non-compliance with the provisions of the Income-tax Act. The penalty may be levied for various reasons, including failure to pay taxes, failure to maintain books of account, etc. |
| Prosecution | Prosecution is legal action against a taxpayer who has committed an offence under the Income-tax Act. The Income-tax Act specifies various offences, such as failure to file tax returns, failure to pay taxes, providing false information, etc. |
| Agriculture Income | Agricultural income refers to income earned by a person from agricultural land situated in India. |
| Assessing Officer | “Assessing Officer” means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under section 120(1)/(2) or any other provision of the Income-tax Act. Also includes the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under Section 120(4)(b) to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under the Income-tax Act. |
| Books of Accounts | “Books or Books of Account” includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or in electronic form or in digital form or as print-outs of data stored in such electronic form or in digital form or in a floppy, disc, tape or any other form of electro-magnetic data storage device. |
| Form 26AS | Form 26AS is a tax statement of an assessee which contains a complete record of tax deducted at source (TDS), tax collected at source (TCS), advance tax paid, self-assessment tax paid, and any other tax payment made by the taxpayer. It also contains details of demands and refunds of the taxpayer, pending and completing proceedings, information relating to specified financial transactions, etc. |
| Tax Deducted at Source | In the mechanism of deduction of tax source, a payer of income or a sum is required to deduct tax from certain payments at the prescribed rates and deposit it to the credit of the Central Government within the prescribed time. |
| Tax Collected at Source | In the mechanism of collection of tax source, the seller is required to collect tax in specified transactions from the buyer or licensee or lessee, etc.at the prescribed rates and deposit it to the credit of the Central Government within the prescribed time. |
| Annual Information System | Annual Information Statement (AIS) is a statement that provides complete information about a taxpayer for a particular financial year. It contains information about taxpayers’ incomes, financial transactions, tax details, income-tax proceedings, etc. |
| Self-assessment tax | ‘Self-Assessment’ means calculation of total income and tax liability thereon by the assessee himself. It is paid after 31stMarch but before filing of return of income. |
| TDS Certificates | TDS certificate is certificate issued by the person who is required to deduct tax at source. TDS certificate specifies the rate of TDS, TDS amount and such other particulars as may be prescribed related to taxpayer. |
| Tax Deduction and Collection Number (TAN) | Tax Deduction & Collection Account Number (TAN) is a 10-digit alpha-numeric number to be obtained by all persons who are responsible for deducting or collecting tax. |
| Permanent Account Number (PAN) | The Permanent Account Number (PAN) is a ten-digit alpha-numeric number, issued for the purpose of identification of a taxpayer. PAN has to be mentioned in all communications with the Income-tax Dept. and in specified financial transactions exceeding the prescribed threshold limit. |
| Appeal | Appeal is a process by which a person (assessee or revenue) aggrieved by an order passed by the authorities can challenge it before the judicial authorities. |
| Double Taxation Avoidance Agreement (DTAA) | Double Taxation Avoidance Agreements (DTAA) is an agreement entered into by the Central Government with the foreign countries or specified territory for granting relief, avoidance of double taxation, exchange of information for preventing evasion or avoidance of tax or for recovery of tax. |
| Senior Citizen | ‘Senior citizen’ means an individual whose age is 60 years or more at any time during the relevant previous year but less than 80 years on the last day of the previous year. |
| Super-senior Citizen | ‘Super senior citizen’ means an individual whose age is 80 years or more at any time during the relevant previous year. |
| Revised Return | A return filed to rectify the error or omissions in the original return is treated as revised return. |
| Belated Return | A return of income filed after the expiry of due date is called belated return of income. |
| Rectification | Rectification is a process of correcting errors or mistakes in the order passed by the Income-tax authorities. The power to rectify the mistake may be exercised by the authority concerned on his own initiative or when mistake is brought to his notice by the assessee concerned. |
| Deductor | A deductor is a person who is required to deduct tax at source as mandated by the various provisions of the Income-tax Act. |
| Deductee | A deductee is a person from whom tax is being deducted in accordance with the provisions of the Income-tax Act. |
| Capital Asset | The term ‘capital asset’ means:
a) Property of any kind, held by an assessee, whether or not connected with his business or profession; b) Any securities held by a FII which has invested in such securities in accordance with the SEBI Regulations; c) Any unit linked insurance policy to which exemption under Section 10(10D) does not apply on account of applicability of the fourth and fifth provisos. d) |
| Dividend | Dividend is an appropriation of net profit that an entity pays out to its shareholders. |
| Interest | The term interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. |
| Legal Representative | Legal representative has the meaning assigned to it in clause (11) of Section 2 of the Code of Civil Procedure, 1908. |
| Maximum Marginal Rate (MMR) | The Maximum Marginal Rate (MMR) is the rate of income tax (including surcharge and health & education cess) for the highest slab of income applicable to an individual, AOP or BOI. |
| Person | Person includes an individual, a Hindu undivided family, a company, a firm, an association of persons or a body of individuals, whether incorporated or not, a local authority, and every artificial juridical person, not falling within any of the preceding sub-clauses. |
| Relative | Relative, in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual. |
| Resident | “Resident” means a person who is resident in India within the meaning of Section 6 of the Income-tax Act.. |
| Non-Resident | A person is said to be a non-resident if he is not a resident in India as per Section 6 of the Income-tax Act. |
| Income Tax | Income tax in India is governed by Entry 82 of the Union List of the Seventh Schedule to the Constitution of India, empowering the Central Government to tax the income. Income-tax law consists of Income-tax Act, 1961, Income-tax Rules 1962, circulars and notifications issued by the CBDT, annual Finance Acts, and judicial pronouncements by the Supreme Court, High Courts and Income-tax Appellate Tribunals. |
| Total Income | The total income of a person shall include all income which is received or is deemed to be received in India or which accrues or arises or is deemed to accrue or arise in India to the assessee in a particular year. Further, income accruing or arising outside India shall also be included in the total income but only in case of a person resident in India. However, if the person is not ordinarily resident in India, income accruing or arising outside India shall be included in the total income only if it is derived from a business controlled in or a profession set up in India. |
| Speculative Transaction | Speculative transaction means a transaction in which a contract for the purchase or sale of any commodity including stock and shares is periodically or ultimately settled otherwise than through actual delivery or transfer of the commodity or scrips. |
| Set off of Losses | Set off of losses refers to the practice of adjusting losses incurred from one source of income against profits earned in another source of income. |
| Carry forward of losses | Carry forward of losses means carrying forward losses from current financial to next financial year in order to adjust them from future profits. |
| Liable to tax | Liable to tax, in relation to a person and with reference to a country, means that there is an income-tax liability on such person under the law of that country for the time being in force and shall include a person who has subsequently been exempted from such liability under the law of that country. |
| Statement of Financial Transaction | Statement of Financial Transaction (SFT) is a reporting mechanism wherein specified entities are required to provide information about material financial transactions entered into by certain person to the Income-tax Dept. |
| Cost of Acquisition | The cost of acquisition in respect to a capital asset refers to the cost incurred in acquiring such capital asset. It shall be computed as per Section 55(2) of the Income-tax Act. |
| Income Tax Return | Income tax return is a form through which the particulars of income earned by a person in a financial year and taxes paid on such income are communicated to the income tax department. Different forms of return of income are prescribed for filing of returns for different status and nature of income. These forms can be downloaded from https://www.incometax.gov.in/iec/foportal/ |
| Updated Return | An updated return is a return of income furnished under Section 139(8A). It can be furnished within 24 months from the end of the relevant assessment year. |
| Board | Board means the Central Board of Direct Taxes (CBDT) constituted under the Central Boards of Revenue Act, 1963. |
| Foreign Tax Credit | Foreign Tax Credit (FTC) is a mechanism that allows taxpayers to claim credit for taxes paid in a foreign country against their tax liability in India. |
[As amended by Finance Act, 2024]
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