What are some income tax terms that everyone must know?

Preeti Taneja

Entrepreneur | Posted on 24-Jul-2018

There are literally hundreds and thousands of income tax terms out there. And honestly, unless you’re a professional in this niche, you don’t need to know them.

But, there certainly are few key income tax terms that you MUST know. Here are 5 of them:

i. Capital Gains: Say, you purchased a few shares in a company at Rs 50,000. In about 7 months, you sold the shares at Rs 60,000. This profit made in this buy and sell of Rs 10,000 is your capital gains. When you sell an asset at a higher price than at a price you purchased it, the profit you make in the transaction qualifies to be your capital gains. This capital gain adds up to your gross income.

ii. Tax Exemption: Not all your income is taxed. The amount that is not taxed is called exemption. In India, over the course, the government has introduced many sections of tax exemptions to bring relief to the taxpayers. Some nature of Incomes that qualifies for tax exemption includes education scholarship, agricultural income, pensions, payment received under Public Provident Fund act, life insurance premium, National Savings Certificates and more.

iii. Adjusted Gross Income: Add all your source of income. That’s called gross income. But NOT this whole amount is taxed. When you exclude the deduction or expense, it is then called Adjusted Gross Income. Even AGI is not completely taxed. It goes through certain exemptions that you qualify for. In the end, what you get is taxable income on which Income tax is levied.

iv. Withhold: Also called TDS or Tax Deducted at Source in India. It means, when you receive your salary or wages, taxes are already deducted, from that amount, by your employer. You don’t have to pay tax on the final money you get. Of course, you will have to file for Income tax; you might have various other sources of income.

v. Self-assessment tax: SAT is a type of due balance that you realize after taking into account TDS or advance tax. You pay this sum in the assessment year before filing the returns.

Of course, there are many income tax terms that you must know. For the starters, keep these 5 in your mind.

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sonia dawar

Virtual CFO + Business Finance Coach | Posted on 12-Jul-2021

1.Financial year and assessment year :

The fiscal year is that the year during which you earn an income. Assessment year is that the year during which you evaluate your income and file a tax return. you'll be ready to disclose your income for the year only after completion of the year. Hence, the assessment year is usually the year next to the fiscal year.

Understanding the difference between fiscal year & Assessment Year becomes vital as these are quoted on every document you file or receive from the tax department

2. Slabs under the Income-tax act

In India, we comply with the slab taxation system, which may be labeled primarily based totally upon the taxpayer's age. The tax costs range with distinction in slabs, consequently, it turns critical to acquire an understanding of slab taxation machine prevalent.

3.Check TDS form 26AS

Tax is deducted on profits you earn through the company below phase 192. Also, in case you earn any profits from FD interest, rent, expert fees, commission, consultancy offerings, etc, the profits you get hold of is the internet of TDS (if profits exceed the prescribed limit).

While submitting your taxes you may declare prompt of taxes payable with such quantity of TDS already deducted out of your profits on numerous occasions. There may arise a scenario that your TDS is deducted however now no longer deposited with the tax government otherwise you forgot to assert any quantity whilst submitting your ITR.

In all such scenarios, the remaining loss will arise to you, as a result, we advocate go checking your TDS information with shape 26AS. If you be aware of any discrepancy in shape 26AS touch the deductor to revise his go back for averting predicted IT notices at your end.

4 Gross Total Income :

Tax is deducted on income you earn via way of means of the business enterprise beneathneath section 192. The manner of submitting tax returns begins with the computation of your Gross Total Income (GTI). GTI consists of income earnings; earnings from residence property; income and profits of business & profession; capital advantage and earnings from different sources. These are computed after adjusting for the applicable exemptions beneath neath every head, consisting of HRA, hobby paid on the domestic loan, eligible allowances, etc.

5. Tax Deduction at Source (TDS) –

The tax that is deducted earlier than the payment is made to the receiver (the deductee), is referred to as Tax Deducted at Source or TDS. Salary, interest on financial institution deposits, commission, session fees, expert fees, hire price, etc, are problems to TDS as in keeping with the availability of the Income Tax Act. This deduction is captured withinside the Form 26AS or TDS certificates issued with the aid of using the deductor, or the only making the price. The assessee can use these certificates at the same time as submitting earnings tax to get declare credit score for the tax paid.