| Acquisition
- Cost of |
Expenses incurred for
acquiring a capital asset.
|
| Actual Cost |
This is the amount added to the block of assets on
acquisition of an asset. It is the amount actually paid to purchase the
asset (subject to adjustments provided in the law) less any amount met by
another person.
|
| Advance
Ruling |
The determination by an authority constituted by the
Central Government, of a question of law, or facts in relation to a
transaction.
|
| Advance tax |
Where the estimated tax liability of an assessee
(Net of Tax deducted at source) exceeds a minimum prescribed limit
(presently Rs.5000), he is liable to pay the tax in instalments during the
year in which it is earned. Until assessment is made, such tax is called
‘Advance Tax’.
|
| Agreement |
It is the
assent of two or more persons to the same thing.
|
| Agricultural
Income |
It refers to income of an agricultural nature
derived from land situated in India or from a building situated near such
land used for agricultural purposes. Agricultural income is exempt from
tax but is taken into consideration to determine the marginal rate of tax
for individuals and HUFs.
|
| Amalgamation |
Merger of two or more companies so that the assets
and liabilities of the erstwhile companies become the assets and
liabilities of the new company and the shareholders of the earlier
companies usually become the shareholders of the new company.
|
| Amortisation |
The gradual charging of an expenditure to revenue.
Usually applicable where the benefit is expected to accrue over a period
of time.
|
| Annual
Charge |
It means a charge to secure an annual liability but
does not include any tax in respect of any property or income.
|
| Annual value |
Where an income is earned from a house property, the
taxability is on its annual value. This is generally the fair annual rent
which the property might be reasonably expected to earn.
|
| Annuity |
A yearly allowance or income. It is a grant of an
annual sum for a term of years, for life or in perpetuity.
|
| AOP |
An association of two or more persons who have
joined together for a common purpose or common action.
|
| Appeal |
A request to a higher authority to consider and test
the legality and soundness of the decision of a lower authority.
|
| Appellant |
One who prefers an appeal against the order of a
judicial authority.
|
| Arrangement |
It is a preparatory agreement or a transaction whose
terms are understood but not yet consummated.
|
| Arrear Rent |
The rent which is overdue and still needs to be
paid.
|
| Assesses |
Assesses refers to a person who is liable to pay any
amount under the Income Tax Act or against whom any proceedings have been
made for the determination of his income, loss or refund.
|
| Assessment |
The process by which the income and tax liability of
an assesses is determined by the assessing officer.
|
| Assessment
Year |
It is the period of 12 months immediately following
the year in which income is earned. It starts on the 1st of April and ends
on 31st March of the next year. For e.g. for the financial year 1999-2000,
the assessment year will be 2000-2001.
|
| Attachment |
Legal seizure of a person’s property to recover any
dues from the assessee.
|
| Bad debt |
An amount due from a person, which is no longer
expected to be recovered by the lender.
|
| Block of
Assets |
A group of assets falling within a class of assets
having a common rate of depreciation prescribed under the Act. For the
purpose of Income Tax, depreciation is required to be computed on block of
assets instead of individual assets.
|
| Block Period |
It is a period of 10 previous years immediately
preceding the previous year in which the search is conducted and part of
the previous year up to the date of search.
|
| Bonus Shares |
Shares which are allotted to shareholders of a
company free of cost due to their share-holdings in the company.
|
| Book Profit |
It is the net profit shown in the Profit and Loss
Account prepared as per the provisions of the Companies Act subject to
certain adjustments which have been specified in the Income Tax Act.
|
| Business |
Business includes any exercise in the nature of
trade, commerce or manufacture and any adventure or concern in the nature
of trade, commerce or manufacture.
|
| Buy-Back of
shares |
It is the purchase of its own shares by the company.
|
| Capital
Asset |
It refers to any property held by the assessee
excluding stock in trade, moveable items held for personal use (except
jewellery), agricultural land in India and certain specified bonds.
|
| Capital
Charge |
It means a charge to secure the discharge of a
liability of a capital nature.
|
| Capital
gains |
The income received from the sale or transfer of
capital assets is referred to as Capital Gains. It is subject to taxation
under the Income Tax Act.
|
| Carry
forward of Loss |
The facility to adjust the excess of your expenses
over income in any year with the income of subsequent years. It is
permitted to carry forward this amount subject to certain conditions and
for a maximum period of 8 years only.
|
| Casual
Income |
An income, which is not earned as business income
and is generally non-recurring in nature. Casual income up to Rs.5000/- in
a financial year is exempt from tax.
|
| Charge of
Income Tax |
Income tax is an annual charge on the income earned
by every person that is in excess of the maximum amount exempt from tax.
|
| Charitable
purpose |
It includes relief to the poor, education, medical
relief, and the advancement of any other object of general public utility.
|
| Child |
Child for an individual includes a stepchild and an
adopted child.
|
| City
Compensatory Allowance |
An allowance given to an employee to compensate the
extra expenditure which he has to bear by reason of his posting at a
particular place.
|
| Clubbing of
income |
Income of some other person being included with the
assessee’s income for the purpose of calculating the total income of the
assessee.
|
| Commuted
Pension |
Lump sum payment in lieu of periodical pension
payment.
|
| Compulsory
Tax Audit |
Where the gross turnover / receipts of a business
exceed Rs.40 lakhs or the receipts in a profession exceed Rs.10 lakhs, and
in certain other cases the law requires that an audit should be conducted
by a chartered accountant and a report submitted in the prescribed format.
|
| Computer
Software |
Any computer programme recorded on any disc, tape,
perforated media or other information storage device or any customised
electronic data or any product or service of similar nature as may be
notified by the Board.
|
| Computer
System |
It means a device or a collection of devices
including input and output support devices, excluding calculators which
are not programmable and capable of being used in conjunction with
external files, or more of which contain computer programmes, electronic
instructions, input data and output data, that performs functions
including, but not limited to, logic, arithmetic, data storage and
retrieval, communication and control.
|
| Coparcenor |
Male member of an HUF who acquires interest in the
HUF property by birth and who has the right to claim partition of the HUF
property.
|
| Corporate
Dividend tax (CDT) |
Tax payable by companies on the amount of dividend
declared or paid by the company. Presently, the rate of CDT is 20% plus
surcharge of 10%.
|
| Cost
Inflation Index |
It is the Inflation Index notified for the purpose
of Indexation of Capital assets. It is announced every year and is made on
the base of 1980-81 as 100.
|
| Cost of
acquisition |
It is the value for which the asset is acquired by
the assessee. Expenditure of capital nature for completing or acquiring
the title to the property is also includible.
|
| Cost of
capital employed |
It means the aggregate of the issued capital,
debentures and long-term borrowings on the last day of the previous year
in which the business of the assessee commences or in which the extension
of the undertaking is completed.
|
| Cost of
improvement |
It means all expenditure of capital nature incurred
in making any additions/alterations to the capital asset by the assessee.
|
| Cost of
project |
It is the actual cost of the fixed assets, being
land, buildings, leaseholds, plant, machinery, furniture, fittings and and
railway sidings which are shown on the books on the last day of the
previous year in which the business of the assessee commences or in which
the extension of the undertaking is completed.
|
| Covenant |
An agreement, convention or promise of two or more
parties, by which either party pledges to the other that something is
either done or shall be done or stipulates for truth of certain facts.
|
| Demerger |
Transfer pursuant to a scheme of arrangement under
the Companies Act, 1956, by a demerged company of its one or more
undertakings to any resulting company subject to the conditions which have
been prescribed.
|
| Depreciation |
Diminution in the value of an asset due to physical
wear and tear, obsolescence etc. Generally this loss cannot be restored by
repairs and maintenance.
|
| Direct tax |
A tax where the incidence of tax is borne by the
person making the payment. For example, Income tax, Wealth Tax.
|
| Dividend |
That part of the profits of a company, which is
distributed among its shareholders. Under the income tax law, distribution
of assets, debentures, deposit certificates etc. by a company to its
shareholders would also amount to dividend.
|
| DTAA |
Double Taxation Avoidance Agreement are entered into
by the Central Government with a foreign Government for granting relief
from levy of tax on an income in both the countries and for the exchange
of information for the prevention of evasion and avoidance of tax.
|
| Emoluments |
Advantages and benefits to which an employee is
eligible in addition to his salary.
|
| Employee’s
Provident Fund |
It is a scheme for the benefit of employees after
their retirement. Under this scheme, during the course of employment a sum
is contributed to the fund, by the employer and the employee. At the time
of retirement, both these amounts and the interest accrued thereon is
available to the employee.
|
| Employees’
Provident Fund Scheme |
It is a retirement benefit scheme. The accumulated
balance is paid to the employee at the time of his retirement or
resignation.
|
| EOU’s |
Export oriented units (EOUs) are business
undertakings where at least 75% of the sales are exported outside India.
They are exempt from tax subject to fulfilment of certain conditions.
|
| ESOP |
Employees Stock option- Where the employee is
offered shares and stock of the company in which he is employed, normally
at a discounted rate.
|
| Ex parte
Assessment |
Assessment made in the absence of representation by
any one party to the case. It is also known as best judgement assessment.
|
| Exempted
Income |
Any income on which tax is neither to be determined
nor is to be paid.
|
| Face Value |
Nominal value of the security as mentioned on the
face of the title document.
|
| Fair Market
Value |
The value which would be received on exchange
between a knowledgeable buyer and seller transacting at an arms length.
|
| Filing of
Income tax return |
Submission of statement of income to the income tax
department. Income tax return has to be accompanied by challans of tax
paid, TDS certificates, tax computation statement and other documents /
certificates required under the law.
|
| Film
software |
A copy of a cinematograph film made by any process
analogous to cinematography on acetate polyester or celluloid film
positive, magnetic tape, digital media or other optical or magnetic
devices and certified by the Board of film certification.
|
| Foreign
Exchange assets |
Specified assets which the assessee has acquired or
purchased with, or subscribed to in convertible foreign exchange.
|
| FTZ |
Free Trade Zones -Certain areas such as Khandla,
Santa Cruz, Falta, Noida, Cochin, etc. have been recognised by the
Government as Free trade Zones. In these areas the Industries are exempt
from tax subject to fulfilment of certain conditions.
|
| Gift |
Transfer of a property made voluntarily and without
consideration. After the abolition of Gift Tax act, Gifts do not attract
any Tax.
|
| Gratuity |
A gratuitous payment made by an employer to his
employee for the services rendered to him.
|
| Heads of
Income |
The total income of an assessee is classified under
five different heads viz. salary income, income from house property,
income from business and profession, capital gains and income from other
sources. This classification of income is important as different
deductions and exemptions are available under the different heads.
|
| Hindu
Undivided Family |
A Hindu undivided family is a separate taxable
entity and consists of all persons lineally descending from a common
ancestor including their wives and unmarried daughters.
|
|
Hire-purchase |
A system where a hired article becomes owned by the
hirer after a specified number of payments.
|
| HRA |
Its full form is House Rent Allowance. It is the
amount paid to the employee to meet his expenditure relating to the rent
which is payable by him.
|
| Improvement
- Cost of |
Capital expenditure for making addition / alteration
to capital assets.
|
| Income
Exempt from tax |
Any income on which tax is neither to be determined
nor is to be paid. For example agricultural income, dividend income etc.
|
| Income from
house property |
It is the annual value of a house property (taken as
nil if it is self- occupied), from which certain specified deductions are
allowed. The resultant amount is the income from house property.
|
| Income from
other sources |
Income which is not covered under any of the earlier
four heads of income i.e. Salary Income, House property income, Income
from Business or Profession or Capital Gains, is charged under this head.
|
| Indemnity |
A compensation for loss or damage.
|
| Indexation |
In case of capital gains, the taxpayer is allowed
the benefit of indexing the cost of acquisition / cost of improvement of a
capital asset for inflation by using the appropriate ratio. The ratio is
the Cost Inflation Index of the current year to the Cost Inflation Index
of the year of acquisition / improvement.
|
| Indexed cost
of acquisition |
It is the amount which bears to the cost of
acquisition the same proportion as the cost inflation index for the year
in which the asset is transferred bears to the cost inflation index for
the first year in which the asset was held by the assessee or for the year
beginning on April,1, 1981, whichever is later.
|
| Indexed cost
of improvement |
It is an amount which bears to the cost of
improvement the same proportion as the cost inflation index for the year
in which the asset is transferred bears to the cost inflation index for
the year in which the improvement of the asset took place.
|
| Indirect Tax |
This tax is levied on one person and it is finally
paid by another person, that is the incidence of tax is shifted to the
ultimate user. For example in case of Sales Tax the amount of tax is
charged to the customers.
|
|
Infrastructure facility |
It means road, highway, bridge, airport, port,
railway system, water supply project, irrigation project, sanitation and
sewerage system or any other public facility of a similar nature as has
been notified.
|
| Intangible
Assets |
Assets not having a solid physical existence but
having some value or worth e.g. goodwill.
|
| Karta |
Head of the Hindu Undivided Family who manages the
affairs and the property of the family.
|
| Lease |
A contract whereby an owner of a house, land etc.
agrees to let someone else use it for a stated period of time in return
for payment.
|
| Lock-in
period |
It is the duration during which the person is not
allowed to transfer the shares or stock he has acquired.
|
| Long Term
Capital Asset |
A capital asset held for more than 3 years from the
date of acquisition. However, shares, units of mutual funds and UTI
considered as Long Term Capital Asset if they are held for more than 12
months.
|
| Long-term
finance |
It means any loan or advance where the terms under
which the monies are loaned or advanced provide for repayment alongwith
interest thereof during a period of not less than five years.
|
| Maximum
Marginal rate |
The rate of income tax, including surcharge
applicable in relation to the highest slab of income in case of
individuals.
|
| Method of
Accounting |
It is the set of rules and principles, which are
followed in the preparation of accounts. There are two broad categories
allowed under the Act; cash and accrual method.
|
| Method of
accounting - Accrual |
Also referred to as mercantile method of accounting;
it is based on the principle that income and expenses should be recognised
as and when they occur and not as and when receipt / payment thereof is
made. It is one of the two methods of accounting permitted under the
Income Tax Law for determining income from Business / Profession and
Income from other sources.
|
| Method of
accounting - Cash |
A method of accounting in which income and expenses
are recorded in the books only when the receipt / payment is actually
made. It is one of the two methods of accounting permitted under the Act.
|
| Minimum
Alternative Tax (MAT) |
Minimum amount of tax payable by a company where the
taxable profit of a company is less than the specified amount.
|
| Notional |
Existing in imagination only, not real.
|
| One-by-six
scheme |
A scheme whereby if a person fulfils one of the six
economic criteria, he is required to file his income tax return even if he
has no taxable income. The criteria are ownership of a house, ownership of
car or telephone connection, foreign travel in any year, member of a club
with fees of Rs.25,000 or more and ownership of a credit card, subject to
certain conditions.
|
| Paid |
It means actually paid or incurred depending upon
the method of accounting followed by the assessee.
|
| Partition of
HUF |
When property of the HUF (Hindu Undivided Family) is
distributed among its members and the HUF no longer exists.
|
| Penalty |
Amount of monetary fine levied on the taxpayer for
violating the provisions of the Act.
|
| Pension |
Periodic payment received by an employee after
retirement from service. Under the Income Tax Act, it is taxed as salary
income.
|
| Permanent
Account Number (PAN) |
It is unique number allotted by the Income tax
Department to every tax payer for identification.
|
| Perquisites |
Non monetary benefits enjoyed by an employee from
his employer such as rent free house or car provided by the employer.
|
| Person |
A 'person' is the taxable entity under the Act. a
person could be an individual, a Hindu Undivided Family, a Partnership
Firm, a Company, an Association of Persons / Body of Individuals, Local
authorities and any other Artificial Judicial Person.
|
| Plant |
It includes ships, vehicles, books, scientific
apparatus and surgical instruments used for the purpose of business and
profession.
|
| Power of
Attorney |
An instrument empowering another person to act on
behalf of the person who executes it.
|
| Preliminary
expenses |
These are expenses incurred before the setting up of
the business / incorporation of the company. 1/5th of such expenses are
allowed as deduction each year.
|
| Presumptive
Taxation |
In case of certain businesses such as retail
trading, civil construction etc., the law allows for the presumption of a
certain percentage of the turnover as income from the business and
consequent tax thereon. Such taxation is known as presumptive taxation.
Tax levied on an amount, which is estimated and specified for the
different assessee mentioned under the provisions of the Act.
|
| Previous
Year |
It is the period of 12 months starting from 1st
April, in which the income is actually earned.
|
| Profession |
It implies the professed attainments in special
knowledge as distinguished from mere skill, which is acquired only after
patient study and application.
|
| Public
provident Fund |
It is a fund established by the Central Government
for the benefit of the general public to mobilise personal savings.
|
| Reassessment |
Where the assessee has already been assessed to tax
once and his file is taken up again for assessment, due to various
reasons, it is called a reassessment.
|
| Recognised
Provident Fund |
It is a provident Fund recognised by the
Commissioner of Income Tax as per the Rules laid down under the Income Tax
Act.
|
| Refund of
tax |
Amount returned to the taxpayer by the Income Tax
department being the amount paid by him in excess of his actual tax
liability.
|
| Relative |
Relative for individual means his / her spouse,
brothers, sisters, or any lineal ascendant or descendant of that
individual.
|
| Resulting
Company |
In the case where a demerger takes place the company
or companies to which the undertakings of the demerged company are
transferred are termed the resulting companies.
|
| Retainership
fees |
A fee paid to procure professional services.
|
| Revised
return |
Where an income tax return is filed with certain
information omitted or some information incorrect, a corrected return can
be filed. Such return is known as a revised return.
|
| Right Shares |
The option of subscribing to future shares of a
company is first given to the company's existing shareholders. Such shares
are called Right shares.
|
| Sahayata |
A scheme to help and assist Income tax and corporate
taxpayers.
|
| Salary
Income |
This is the head under which income such as wages,
pension, gratuity, leave encashment, advance salary, perquisites etc. are
taxed.
|
| Sammaan |
A scheme wherein exemplary taxpayers are honoured by
the department and given certain privileges.
|
| Saral Form |
It is a one-page income tax return form (Form 2D) in
which every non-corporate assessee can file his return of income.
|
| Scientific
Research |
It means any activities for the extension of
knowledge in the fields of natural or applied sciences
|
| Scrutiny
Assessment |
Where the return submitted by the tax payer is
checked and the taxpayer is required to give explanations and evidence in
support of the particulars furnished in the return.
|
|
Self-assessment tax |
Amount paid by the assessee on the basis of his own
determination of income and tax payable thereon.
|
| Senior
Citizen |
Persons who have attained the age of 65 years at any
time during the previous year. Such persons are allowed a rebate from tax
payable of up to Rs.10,000.
|
| Settlement |
The conveyance of any estate for the benefit of some
person or persons.
|
| Site
restoration Fund |
A fund to be maintained by an assessee carrying on
the business of prospecting for or the extraction or production of
petroleum or natural gas to be utilised for the purpose of filing up of
spent wells.
|
| Slump Sale |
Transfer of one or more undertakings as a result of
the sale for a lump sum consideration without values being assigned to
individual assets and liabilities.
|
| Specified
Employee |
An employee who is a director of the company or
holds at least 20% equity shares in the company or whose salary income is
more than Rs.24000/- per annum. Certain perquisites / benefits received by
such employees are taxable under the head 'Salaries'.
|
| Speculation
business |
It is a business in which speculative transactions
are carried out. A speculative transaction is one in which there is a
contract of sale and purchase of commodities and the contract is settled
otherwise than by actual delivery or transfer of the commodity.
|
| Speculative
transaction |
A transaction, which is settled without the actual
delivery.
|
| Standard
Deduction |
A consolidated deduction available to a salaried
employee with earnings from salary below Rs.5 Lakh per annum. The
deduction is based on the salary income.
|
| Statutory |
Required or prescribed by law or a rule.
|
| Statutory
Provident Fund |
It is a Fund set up under the provisions of the
Provident Fund Act, 1925. The Fund is maintained by Government and
semi-government organisations, local authorities, railways, universities
and recognised educational institutions.
|
| STP |
Software Technology Parks are areas set up in
accordance with the STP Scheme notified by the Government of India,
wherein the software industries and units are exempt from tax subject to
fulfilment of certain conditions.
|
| Summary
Assessment |
Particulars declared in the return of income are
taken as true and the taxpayer is not called for detailed explanation.
Most of the returns filed are subject to this assessment
|
| Suvidha |
A scheme whereby all computerised branches of public
sector banks would accept income tax payments.
|
| Tax Audit |
An inspection or examination of the organisations
accounts by the specified persons as per the requirements of the Income
Tax Act.
|
| Tax
avoidance |
Computation and determination of tax less than the
actual tax liability by taking advantage of loopholes in the law.
|
| Tax Evasion |
Resorting to dubious methods whereby income is
understated or expenses are overstated with a view to evade tax. Tax
evasion is illegal.
|
| Tax planning |
Arranging affairs in such a manner so as to minimise
tax liability within the limits of law. Tax planning is legal.
|
| Tax Rebate |
A deduction from the amount of tax payable availed
when the assessee makes the specified investments.
|
| Trus |
An obligation annexed to the ownership of property,
and arising out of a confidence reposed in, and accepted by the owner, or
declared and accepted by him, for the benefit of another, or of another
owner.
|
| Undisclosed
Income |
Any money, bullion, jewellery or other valuable
article or thing or any income based on the entries in the books of
accounts or other documents or transactions which represents wholly or
partly income or property which has not been disclosed as part of the
total income of the assessee.
|
| Venture
capital Company |
A company which has made investments by way of
acquiring equity shares of a venture capital undertaking in accordance
with the prescribed guidelines.
|
| Venture
capital Fund |
A fund established to raise monies by the trustees
for investments mainly by way of acquiring equity shares of a venture
capital undertaking in accordance with the prescribed guidelines.
|
| Venture
Capital Undertaking |
A domestic company whose shares are not listed in a
recognised stock exchange in India and which is engaged in business as may
be notified by the Central Government.
|
| Vocation |
Natural ability of a person to perform some
particular work requiring dedication and skill.
|
| Warrant |
A written legal authorisation for doing something
for e.g. arresting a person or searching property.
|
| Will |
Document containing wishes of a person, the manner
in which the property of the person will be divided after his death.
|
| Working
Partner |
An individual who is actively engaged in conducting
the affairs of the business or profession of the firm in which he is a
partner.
|
| Written down
value |
It is the value of an asset after deducting
accumulated depreciation.
|
Glisters International
