Understanding the distinctions between various legal and tax terms is crucial for clarity in compliance and reporting. An Act outlines what must be done, while a Rule defines how it should be done. A Notification indicates a change in law, whereas a Circular provides clarification. In taxation, the Assessment Year is the year of filing returns, and the Financial Year is the year in which income is earned. An Exemption removes income from tax altogether, while a Deduction reduces taxable income. Gross Income refers to income before deductions, whereas Total Income is after deductions. Terms like Rebate and Relief differ in reducing tax or income considered for tax purposes. In GST, a Supply covers all transactions, while Taxable Supply refers only to those taxable under GST. The difference between Input (goods) and Input Service (services) is also vital. Additionally, various GST returns (like GSTR-1 vs GSTR-3B) serve distinct purposes—sales details vs. tax payment summaries. TDS refers to tax deducted at source, while TCS is tax collected during receipt. Understanding these terms, including the differences between Penalty (punitive) vs. Late Fee (fixed charge), Interest (time delay) vs. Penalty (legal breach), and Tax Avoidance (legal) vs. Tax Evasion (illegal), ensures better compliance. Recognizing distinctions between concepts like Capital Asset vs Stock-in-trade, Auditor vs Accountant, and Provision vs Reserve is crucial for accurate reporting and financial management. These differentiators are essential for professionals navigating legal and tax systems.
| Term 1 | Term 2 | Key Difference (in simple terms) |
|---|---|---|
| Act | Rule | Act = what must be done; Rule = how it must be done |
| Notification | Circular | Notification = change in law; Circular = explanation/clarification |
| Assessment Year | Financial Year | AY = year of filing return; FY = year of earning income |
| Exemption | Deduction | Exemption = income not included at all; Deduction = income included but reduced |
| Gross Income | Total Income | Gross = before deductions; Total = after deductions |
| Rebate | Relief | Rebate = reduction in tax payable; Relief = reduction in income considered for tax |
| Supply | Taxable Supply | Supply = any transaction; Taxable Supply = only those on which GST applies |
| Input | Input Service | Input = goods; Input service = services used in business |
| GSTR-1 | GSTR-3B | GSTR-1 = sales details; GSTR-3B = summary return to pay tax |
| ITC Claimed | ITC Utilized | Claimed = recorded in books; Utilized = actually used to pay GST |
| Composite Supply | Mixed Supply | Composite = naturally bundled; Mixed = artificially bundled |
| Zero-Rated | Exempt | Zero-rated = taxable at 0%; Exempt = no tax applicable at all |
| Registered Person | Taxable Person | Registered = officially under GST; Taxable = liable to pay GST (may or may not be registered) |
| Company | Firm | Company = incorporated under Companies Act; Firm = registered under Partnership Act |
| Director | Partner | Director = in company; Partner = in partnership firm |
| TDS | TCS | TDS = tax deducted from payment; TCS = tax collected during receipt |
| PAN | TAN | PAN = for income tax; TAN = for TDS compliance |
| Export | Deemed Export | Export = physical movement outside India; Deemed = treated as export without actual movement |
| Residential Status | Citizenship | Residential = based on stay; Citizenship = legal nationality |
| Notice | Intimation | Notice = action initiated by dept; Intimation = just information |
| Late Fee | Penalty | Late fee = fixed charge; Penalty = punitive in nature |
| Interest | Penalty | Interest = for time delay; Penalty = for legal breach |
| Tax Avoidance | Tax Evasion | Avoidance = legal saving; Evasion = illegal hiding |
| Refund | Reversal | Refund = money returned; Reversal = credit adjustment in books |
| Capital Asset | Stock-in-trade | Capital = for long-term use; Stock = for sale |
| Long-Term | Short-Term | Long-term = held longer (usually 1–2+ years); Short-term = held for less time |
| Invoice | Bill of Supply | Invoice = for taxable goods/services; Bill = for exempt goods or composition dealers |
| Self-Assessment Tax | Advance Tax | Self = paid at year-end; Advance = paid during year |
| Book Profit | Taxable Profit | Book = accounting profit; Taxable = as per tax laws |
| Return | Statement | Return = comprehensive filing; Statement = partial or specific info |
| Auditor | Accountant | Auditor = checks records; Accountant = maintains records |
| Notice u/s 143(1) | Notice u/s 143(2) | 143(1) = intimation; 143(2) = scrutiny |
| Composition Scheme | Regular Scheme | Composition = flat rate tax, limited features; Regular = normal tax with full credit |
| HUF | Individual | HUF = family as unit; Individual = one person |
| Proprietor | Director | Proprietor = owner of business; Director = officer of company |
| Share Capital | Loan | Capital = owner’s money; Loan = borrowed funds |
| Books of Account | Financial Statements | Books = daily records; FS = final reports like P&L, Balance Sheet |
| Provision | Reserve | Provision = for known liability; Reserve = retained profit |
| Primary Data | Secondary Data | Primary = original; Secondary = processed |
| Registered Valuer | Chartered Accountant | Valuer = asset valuation; CA = accounts, audit, and taxes |
| GSTR-9 | GSTR-9C | 9 = annual return; 9C = reconciliation with audit |
| GST Audit | Statutory Audit | GST = specific to GST compliance; Statutory = as per Companies Act |
| Legal Name | Trade Name | Legal = as per registration; Trade = used for branding |
| Invoice Date | Due Date | Invoice date = when bill is made; Due date = when payment is due |
| Turnover | Gross Receipts | Turnover = sale of goods; Receipts = all money received including services |
| Bookkeeping | Accounting | Bookkeeping = record keeping; Accounting = analysis + reporting |
| Payment Date | Credit Date | Payment = when paid; Credit = when it is considered due |
| Encumbrance | Lien | Encumbrance = general legal claim; Lien = specific right to retain asset |
| Appeal | Revision | Appeal = challenging decision; Revision = rectifying or reviewing error |
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