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10 Key Tax Terms To Know

IndianMoney.com Research Team | Updated On Monday, August 03,2015, 11:34 AM

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10 Key Tax Terms To Know

 

 


WHAT IS FINANCIAL YEAR/ASSESSMENT YEAR?


Assessment year is the year of paying tax on the salary/income, you have earned in the previous year, called financial year. You have to  file your returns (pay your taxes), in the year between 1st April 2014 to 31st March 2015 (Assessment Year), for the salary/income you have earned in the previous year, 1st April 2013 to 31st March 2014 (Financial Year).

WHAT IS ADVANCE TAX?

You pay a part of your tax liability in the same year you earn your salary/income (Pay as you earn scheme). If your tax liability is more than INR 10000, you can pay advance tax.

If you are a salaried employee you don’t have to pay advance tax, as TDS (tax deducted at source) is already cut from your pay by your employer. You have to pay advance tax on your other sources of income.

If you have sources of income other than your salary, you pay advance tax. (Capital gains on shares/house or property, gains from lottery or horse racing, interest on fixed deposit).

On or before 15th September

Not less than 30% of the advance tax liability

On or before 15th December

Not less than 60% of the advance tax liability

On or before 15th March

100% of the advance tax liability

 

WHAT IS CAPITAL GAIN?

You have bought a property /equity (shares or mutual fund) /debt mutual funds.You sell it for a profit after a certain period of time. This is called a capital gain.

If the investment (shares or equity mutual funds), is held and sold off under a year, the gains or the profit are short term capital gains.

If held for a period longer than a year and then sold, the gains are called long term capital gains. For a house /property/debt fund if you sell within 3 years, it is short term and above this it is long term capital gain.

WHAT IS INDEXATION?

 If you buy a house/property and sell it after a period of time, you get a profit called capital gains. You are taxed on this gain and higher the profit you make, greater is the tax. There is a tax benefit where the effects of inflation are also taken into effect called indexation.

Inflation eats up your profits and longer is the time, greater are its effects. This benefit is mainly for long term capital gains of house/property, gold and  debt  funds.

WHAT IS DOUBLE INDEXATION?

If you advance the purchase of your house by a few days and postpone the selling of your house by a few days, you get double indexation benefits. By adjusting the buy/sell of your house/debt mutual funds you are able to tap in a higher inflation benefit.

If you buy a house on March 30th 2010 and sell on April 2nd 2013, you get double indexation benefits. It is a long term capital gain as time held is over 3 years.

WHAT IS NIL ITR?

A report filed with a tax authority showing no transactions or income on which tax is owed. The employee has earned only salary income and the annual interest earned from savings bank account is less than INR 10,000.

The total Income of the employee should  not exceed INR 500,000, (total income means gross total income minus deductions under Chapter VIA (section 80 C to 80 U).Total tax liability of the employee has been paid off by the employer by way of TDS and the employer has deposited the TDS with the Central government.

WHAT IS SELF ASSESSMENT TAX?

You calculate the tax you have to pay on the money you earn in a financial year, at the end of that financial year. You have to account for TDS and advance tax.

WHAT IS FORM 26 AS?

You can access your details from the Form 26 AS only after entering your PAN number.

You get details of:

  • Tax deducted at source
  • Advance tax
  • Self assessment tax
  • All high value transactions made as per income tax rules.

WHEN DO YOU FILE ITR -1 ?

You file Income Tax Return (ITR -1) also called ITR (Sahaj) when you have:

Income from salary

Other sources of income such as interest from your fixed deposits but not income from lottery/horse racing.

You have one house property.

WHAT IS ITR –V?

This acknowledges the receipt of your tax returns by the income tax department when you file your returns electronically.

You must learn these 10 key tax terms so that your tax planning becomes easy.

 

 

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