Tax Glossary

BENEFICIARY - The person who receives or is to receive the benefits resulting from certain acts. In a tax context, the beneficiary is the person entitled to the benefits from trust property or from an insurance policy.

CAPITAL GAIN- Capital gains are any profits made by selling capital assets, such as equities, property, land, gold, etc. Under Indian income tax laws, you need to pay income tax on capital gains.

CAPITAL LOSS- The loss from the sale of a capital asset.

CAPITAL ASSET - Capital Asset means any asset other than stock in trade, Personal effects not being jewellery, rural agriculture land.

CLUBBING OF INCOME - Clubbing of income means income of other person is included in the taxpayer’s total income while computing income tax payable. e.g. Any income of the minor child is to clubbed with the parent whose income is higher.

CASH CREDITS - Unexplained cash credit is any money credited to a taxpayer for which the taxpayer cannot provide any explanation about the nature or source of the money. Under Income Tax Act, any unexplained cash credit to a taxpayers account can be held as income to the taxpayer and taxable under Section 68 of Income Tax Act.

CREDIT - Amount that can be subtracted from the actual amount of tax owed, usually in the income tax. Credits represent tax expenditures aimed at benefiting specific groups (e.g., senior credit) or inducing certain behaviour (e.g., an investment tax credit).

COST - Purchase price paid for property or the value of the exchange for which property is given.

DEDUCTION - An amount subtracted from your taxable income for certain expenses.

DEPENDENT - In terms of income tax,dependent is nothing but a relative of the tax payer (Child, spouse, parents, sibling, etc)for whom the taxpayer provided over half of his or her support during a calendar year.

DEPRECIATION - An annual deduction of a part of the cost of an assets. In general, it means a decline in market value.

DEBENTURE - Interest-bearing bond which is not secured by any specific property, usually issued by a corporation or government to the general public.
OR
Debentures are long-term financial instruments issued by a company for specified tenure with a promise to pay fixed interest to the investor.

DIVIDEND - Company earnings that may be paid out to shareholder according to the number of shares or stocks they hold. Dividends can be earned on stocks as also units of mutual funds.

DEFAULT - Generally, failure to satisfy an obligation when due, or the occurrence of one of the defined events of default agreed to by the parties under a contract.

DISTRIBUTION - A pay-out of cash or property from a corporation to a shareholder.

DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) - Double Taxation Avoidance Agreement is a tax treaty signed between India and another country (or any two/multiple countries) so that taxpayers can avoid paying double taxes on their income earned from the source country as well as the residence country.

DISABILITY - Disability includes blindness, mental retardation, low vision, leprosy cured, hearing impairment and mental illness.

DONATION - Donation means money given voluntarily by one person to another without material return and consideration.

E-FILE - To electronically file a tax return. To file your taxes online.

ENTITY- A person or group of people that pays taxes. Types of tax entities include individuals, businesses, estates, trusts, and charitable organizations.

EXEMPTION - Status of specifies people,property,institutions, or sources of income or wealth not subject to taxation.

ENTERTAINER - Income of a professional entertainer e.g. a musician, actor or other artiste, or sportsman is, in many cases, treated differently from income of persons carrying on other independent profession.

EQUITY - The value of a business after all debts and other claims are settled. Also, the amount of cash a business owner invests in a business and/ or the difference between the price for which a property could be sold and the total debts registered against it.
OR

• The extent of a person's beneficial ownership of a particular asset. This is equivalent with the value of the asset minus the liability to which the asset issubject.
• Paid-in capital plus retained earnings in a corporation.
• The ownership interest possessed by shareholders in a corporation - stock as opposed to bonds.

EXPENSES - Generally, failure to satisfy an obligation when due, or the occurrence of one of the defined events of default agreed to by the parties under a contract.

ENTERTAINMENT ALLOWANCE - A pay-out of cash or property from a corporation to a shareholder.

EMPLOYER -An employer is a person or institution that hires employees. Employers offer wages or a salary to the workers in exchange for the worker's work or labour.

FEE - Fees charged by central or local governments can be distinguished from taxes when they are charged as payments for the supply of particular services by the authorities. Fees are usually not considered taxes when listing taxes to be included in a double tax agreement.

FAMILY PENSION - Family pension is defined as a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of death. However, in case of family pension, since there is no employer-employee relationship between the payer and the payee, therefore, it is taxed as ‘Income from Other Sources’ in the hands of the nominee(s). Family pension is taxable after allowing a deduction of 33.33% or Rs. 15000, whichever is less. Family pension to the family of armed forces personnel including para military forces is not taxable where the death of such person has occurred in the course of operational duties.

GROSS INCOME - All sources of income except exempt income. Gross Income is the starting point for computing taxable income prior to adjustments and deductions.

GIFT RECEIVED - Gift means a sum of money received in cash or in kind by a person without consideration.

GRATUITY - Gratuity is a loyalty benefit provided by the employer for rendering services continuously to an organisation for five or more years. Hence, the amount of Gratuity is given by the employer to an employee for the services rendered by him towards the organisation. The amount of gratuity can be paid by an employer in cash, cheque or by demand draft.

GAIN - Gain is the difference between the price originally paid for the investment and money received upon selling it.

GOVERNMENT HOSPITAL - A government hospital includes any dispensary/hospital run by the Government or a local authority for the medical treatment of government servants and their family members.

HOUSE PROPERTY - House Property means a property which is either let out or used for own Residential purpose.

HOUSE RENT ALLOWANCE(HRA) - House Rent Allowance or HRA is a part of the salary provided by an employer to his employee for his rented accommodation

INCOME - Income is any money earned in cash or in kind by a person whether or not received.

INTEREST INCOME - Money gained from investments, such as bank accounts, bonds, or trusts. Interest is unearned income

INVESTMENT INCOME - Money or other compensation received from profitable investments, generally in the form of interest or dividends.

IMMOVABLE PROPERTY - Also known as real property, immovable property comprises land, houses and buildings.

INFRASTRUCTURE - Infrastructure means basic public facilities provided in the structure of any city. Infrastructure development means any improvement in the city by way of additions made to the basic structure in the form of additional bridges, roads, hotels, rails, highways, water supply projects, irrigation projects, ports, airports, sanitation, sewage systems or any other addition of any nature.

INHERITANCE -- Real property or personal property that is received by heirs.

LEVY - Impose or collect an amount (such as a tax) by compulsion or legal authority.

LOCAL TAX - In countries where there is a central or federal government and separate levels of government at state, provincial, county or city levels, taxes levied at the lower levels of government are commonly referred to as "local" taxes.

LISTED SECURITIES - Securities listed on Recognised Stock Exchange.

LONG TERM CAPITAL ASSET - Any capital asset which is held by a person for more than 36 months (12 months in case of shares, debentures, mutual funds).

LIFE INSURANCE PREMIUM - Any premium paid to insurer against security of life of the assessee or the nominee or any other person in whose name the policy has been taken, is life insurance premium.

MUTUAL FUND - A type of regulated investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities, or money market securities. Or portfolio of securities held by an investment company on behalf of investors.

MUNICIPAL TAXES - Municipal Taxes is tax assessed and levied by a local authority is allowed as a deduction if borne and paid by the assessee during the year.

MEDICAL AUTHORITY - Medical authority means any hospital or institution specified by notification by the appropriate government.

NON-RESIDENT- A person who spends most of the calendar year outside his country but worked or did business there and so must file a state income tax return.

OWNERSHIP - An ownership is given to a person who owns the legal title of the property and has the right to receive income from such property and includes deemed owner.

PRINCIPAL -The face value of an obligation, such as a bond or a loan, which must be repaid at maturity, as separate from the interest.

PERQUISITES - Perquisites are benefits received by a person as a result of his/her official position and are over and above the salary or wages Or Any Amenity (benefit) granted free of cost or at concessional rate like rent free accommodation, domestic servant, Gas etc should be considered as perquisites.

PENALTIES - Charges added to your tax bill for late filing and late payment.

PREMIUM -In the context of a derivative financial instrument, a premium is the amount a purchaser pays for an option. In the context of a bond or other debt instrument, it is the amount paid in excess of the face amount.

PREVIOUS YEAR - The Financial Year in which the income is earned is known as the previous year. Any financial year begins from 1st of April and ends on subsequent 31st March.

PAN - Permanent Account Number (PAN) is a unique ten- digit alphanumeric number, issued in the form of a laminated card, by the Income Tax department.

PROFITS IN LIEU OF SALARY - Profits in lieu of salary are payments received by an employee in lieu of or in addition to salary or wages. Profits in lieu of salary is taxable under the Income Tax Act and must be declared while filing income tax return.

PERSON WITH DISABILITY -A person with disability means the person is suffering from 40% of a disability as certified by a medical authority is a person with disability. If a person has at least 40% of a disability, then he/she is eligible for a deduction of Rs 75,000.

PERSON WITH SEVERE DISABILITY - A person with severe disability means a person who suffers from at least 80 % of a disability or more of one or more than one disability as certified by a medical authority is a person with severe disability. Such a person is eligible for a deduction of Rs 1,25,000.

POLITICAL PARTY - A political party means a party registered under Section 29A of the Representation of the People Act 1951.

REBATE -Return of a portion of a purchase price by a seller to a buyer, usually on purchase of a specified quantity, or value, of goods within a specified period. Unlike discount (which is deducted in advance of payment), rebate is given after the payment of full invoice amount.

REFUND (OF TAX) - Tax repaid to a taxpayer.

REMUNERATION - Employment income and fringe benefits received by an employee for services rendered.

RECOGNIZED PROVIDENT FUND - RPF means a provident fund which has been and continues to be recognized by the Chief Commissioner or Commissioner and includes a provident fund established under a scheme framed under Employees provident fund Act 1952.

RECORD DATE - Record date is the date fixed by the company or the Mutual fund or UTI to entitle the holder to receive dividend or income.

RESIDENT - A person who is liable for tax in a country or state because of domicile, residence, place of management, or another similar criterion.

SCHOLARSHIP - Money awarded for educational purposes. Scholarship funds used to pay for qualified expenses such as tuition, required fees, books, and supplies are generally considered non-taxable income.

STANDARD DEDUCTION - A specific amount that all income tax payer is allowed to deduct instead of claiming itemized deductions. Intended to approximate expenses that reduce the taxpayer’s ability to pay.

SECURITIES - Documents providing evidence of a share in the capital of a company (e.g. share certificate), or the indebtedness of some person to the holder (e.g. government or corporate bonds) or similar legal rights.

SELF-OCCUPIED PROPERTY - A self-occupied property is nothing, but a property owned by you and use for your own residential purpose or occupied throughout the year. If you own more than one house property which are self- occupied, then one of the Property will be treated as 'deemed let out' and the annual value of the property will be the amount for which the property might reasonably be expected to be rented.

SECURITY TRANSACTION TAX (STT)- STT is a tax levied by stock exchange on buying and selling of securities on recognised stock exchange.

STAMP DUTY VALUE - Stamp duty value means the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty.

SELF-ASSESSMENT - System under which the taxpayer is required to declare the basis of his assessment (e.g. taxable income), to submit a calculation of the tax due and, usually, to accompany his calculation with payment of the amount he regards as due. The role of tax authorities is to check (perhaps in random cases) that the taxpayer has correctly disclosed his income.

SOURCE OF INCOME - Sources of income are monetary sources from which income can be earned by an individual or a business. Sources of income for an individual maybe salary, Commission, interest etc.

STOCK - Any shares representing ownership in any corporation or certificates or ownership interest in any corporation.

SURCHARGE - Additional amount which is calculated on and added to the normal charge or levy. In other words, the base on which a surcharge is assessed is the normal or basic amount due. Surtax.

SENIOR CITIZEN - A senior citizen is a person who is a resident of India and is of the age of 60 years and above. However, for FY 2010-11 person shall be considered as senior citizen who is of the age of 65 years and above.

TAX LIABILITY - The total amount of taxes you owe.

TAX RATE - The percentage of income that is owed as tax.

TAXABLE INCOME - Your Adjusted Gross Income reduced by all applicable exemptions, credits, and deductions. The amount of income that is taxed.

TRUST - A trust is a legal arrangement whereby the owner of property (i.e. settlor) transfers ownership to a person(s) (i.e. trustee) who is to hold and control the property according to the owner's instructions, for the benefit of a designated person or persons (i.e. the beneficiaries). A contract affecting three parties, the settlor, the trustee and the beneficiary.

TAX RELIEF -Generic term to describe all methods used to reduce tax liability without regard to the particular way it is accomplished.

TRANSACTION - Action in a bank account. Could be deposit, withdrawal, payment, service charge or interest payment.

TRANSACTION TAXES - Tax that uses a specific type of transaction as its object, e.g. sales tax, immovable property transfer tax, etc.

TAX ON EMPLOYMENT - This is an amount paid to the State Government as a tax on Profession/employment. Only a few states levy this tax.

TUITION FEES - "Tuition fees " used in section 80C have broader meaning and it includes all type of fees payment made to school /colleges etc.

UNLISTED SECURITIES - An unlisted security is a financial instrument that is not traded on any of stock exchange, but through over-the-counter (OTC) market.

UNEXPLAINED INVESTMENTS - Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.

UNEXPLAINED MONEY - Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valu¬able article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, main¬tained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.

UNEXPLAINED EXPENDITURE - Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfacto¬ry, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year.

WILL -A legal document that serves as a key vehicle of transfer at death.