Some very basic terms & their definitions used in context with the Indian Income Tax are given below:
ASSESSEE – is any person who is required to pay Income tax or any other sum payable under the Income Tax Act being interest, penalty etc.
ASSESSMENT YEAR – is the period comprising of twelve months starting on 1st of April & ending on 31st March of the next year. Assessment year succeeds the financial year. For eg. For the FY 2011-2012, the AY will be 2012-2013.
PREVIOUS YEAR – is the financial year preceding the assessment year.
PERSONS LIABLE TO PAY INCOME TAX – are the persons liable to pay income tax if there income levels exceeds the minimum sum that is exempt from tax:
Following are required to pay income tax irrespective of their income levels:
INCOME – refers to earning by the deployment of asset or by rendering any service. Revenue receipts come under this category, which keep accruing from time to time.
The term incomes of great significance with respect to income tax. For the liability of tax is computed on this “Income”. There are five broad heads under which income has been classified.
Heads of Income:
CAPITAL RECEIPTS – Are different from revenue receipts. Capital receipts are generally exempt from tax unless expressly stated.
CLUBBING OF INCOME – would in simple words, mean summing up of the Income prone person with the income of another person. The most common cases the clubbing of minor child’s income with that of his either parent.
DEDUCTIONS – after calculating the total income from the various heads of income, certain amount is deducted towards expenditure incurred to earn that income eg.life insurance premium paid,investment in tax saving schemes & mutual funds. These deductions help in saving a certain amount of tax. They are also called the 80 series deductions as they are contained in sections 80A to 80U.
SET OFF & CARRY FORWARD – Set off is the adjustment of certain losses against income from the various sources of income.
Carry forward is the carrying forward of certain losses to be adjusted (set off) in subsequent years.
GROSS TOTAL INCOME – is the sum of all the earnings from the various heads of income, after set off of any loss that was carried forward from the past years.
TAXABLE INCOME /NET INCOME – is the gross total income less the deductions. It is on this sum that the tax liability is calculated.
PERMANENT ACCOUNT NUMBER – is a unique ten digit alpha-numeric number, on the basis of which the Income tax department identifies the assesse.
INCOME TAX RETURN – after the assessee has calculated his tax liability (self assessment) he is required to file his return of income in the prescribed time & manner. Due dates of filing returns are:
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very nice yaar easy to understand