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.

The determination by an authority constituted by the Central Government, of a question of law, or facts in relation to a transaction.

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’.

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.

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.

The gradual charging of an expenditure to revenue. Usually applicable where the benefit is expected to accrue over a period of time.

It means a charge to secure an annual liability but does not include any tax in respect of any property or income.

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.

A yearly allowance or income. It is a grant of an annual sum for a term of years, for life or in perpetuity.

An association of two or more persons who have joined together for a common purpose or common action.

A request to a higher authority to consider and test the legality and soundness of the decision of a lower authority.

One who prefers an appeal against the order of a judicial authority.

It is a preparatory agreement or a transaction whose terms are understood but not yet consummated.

The rent which is overdue and still needs to be paid.

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.

The process by which the income and tax liability of an assesses is determined by the assessing officer.

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.

Legal seizure of a person’s property to recover any dues from the assessee.

An amount due from a person, which is no longer expected to be recovered by the lender.

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.

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.

Shares which are allotted to shareholders of a company free of cost due to their share-holdings in the company.

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 includes any exercise in the nature of trade, commerce or manufacture and any adventure or concern in the nature of trade, commerce or manufacture.

It is the purchase of its own shares by the company.

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.

It means a charge to secure the discharge of a liability of a capital nature.

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.

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.

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.

Income tax is an annual charge on the income earned by every person that is in excess of the maximum amount exempt from tax.

It includes relief to the poor, education, medical relief, and the advancement of any other object of general public utility.

Child for an individual includes a stepchild and an adopted child.

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.

Income of some other person being included with the assessee’s income for the purpose of calculating the total income of the assessee.

Lump sum payment in lieu of periodical pension payment.

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.

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.

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.

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.

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%.

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.

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.

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.

It means all expenditure of capital nature incurred in making any additions/alterations to the capital asset by the assessee.

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.

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.

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.

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.

A tax where the incidence of tax is borne by the person making the payment. For example, Income tax, Wealth Tax.

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.

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.

Advantages and benefits to which an employee is eligible in addition to his salary.

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.

It is a retirement benefit scheme. The accumulated balance is paid to the employee at the time of his retirement or resignation.

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.

Employees Stock option- Where the employee is offered shares and stock of the company in which he is employed, normally at a discounted rate.

Assessment made in the absence of representation by any one party to the case. It is also known as best judgement assessment.

Any income on which tax is neither to be determined nor is to be paid.

Nominal value of the security as mentioned on the face of the title document.

The value which would be received on exchange between a knowledgeable buyer and seller transacting at an arms length.

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.

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.

Specified assets which the assessee has acquired or purchased with, or subscribed to in convertible foreign exchange.

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.

Transfer of a property made voluntarily and without consideration. After the abolition of Gift Tax act, Gifts do not attract any Tax.

A gratuitous payment made by an employer to his employee for the services rendered to him.

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.

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.

A system where a hired article becomes owned by the hirer after a specified number of payments.

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.

Capital expenditure for making addition / alteration to capital assets.

Any income on which tax is neither to be determined nor is to be paid. For example agricultural income, dividend income etc.

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 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.

A compensation for loss or damage.

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.

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.

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.

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.

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.

Assets not having a solid physical existence but having some value or worth e.g. goodwill.

Head of the Hindu Undivided Family who manages the affairs and the property of the family.

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.

It is the duration during which the person is not allowed to transfer the shares or stock he has acquired.

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.

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.

The rate of income tax, including surcharge applicable in relation to the highest slab of income in case of individuals.

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.

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.

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 amount of tax payable by a company where the taxable profit of a company is less than the specified amount.

Existing in imagination only, not real.

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.

It means actually paid or incurred depending upon the method of accounting followed by the assessee.

When property of the HUF (Hindu Undivided Family) is distributed among its members and the HUF no longer exists.

Amount of monetary fine levied on the taxpayer for violating the provisions of the Act.

Periodic payment received by an employee after retirement from service. Under the Income Tax Act, it is taxed as salary income.

It is unique number allotted by the Income tax Department to every tax payer for identification.

Non monetary benefits enjoyed by an employee from his employer such as rent free house or car provided by the employer.

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.

It includes ships, vehicles, books, scientific apparatus and surgical instruments used for the purpose of business and profession.

An instrument empowering another person to act on behalf of the person who executes it.

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.

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.

It is the period of 12 months starting from 1st April, in which the income is actually earned.

It implies the professed attainments in special knowledge as distinguished from mere skill, which is acquired only after patient study and application.

It is a fund established by the Central Government for the benefit of the general public to mobilise personal savings.

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.

It is a provident Fund recognised by the Commissioner of Income Tax as per the Rules laid down under the Income Tax Act.

Amount returned to the taxpayer by the Income Tax department being the amount paid by him in excess of his actual tax liability.

Relative for individual means his / her spouse, brothers, sisters, or any lineal ascendant or descendant of that individual.

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.

A fee paid to procure professional services.

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.

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.

A scheme to help and assist Income tax and corporate taxpayers.

This is the head under which income such as wages, pension, gratuity, leave encashment, advance salary, perquisites etc. are taxed.

A scheme wherein exemplary taxpayers are honoured by the department and given certain privileges.

It is a one-page income tax return form (Form 2D) in which every non-corporate assessee can file his return of income.

It means any activities for the extension of knowledge in the fields of natural or applied sciences

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.

Amount paid by the assessee on the basis of his own determination of income and tax payable thereon.

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.

The conveyance of any estate for the benefit of some person or persons.

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.

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.

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'.

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.

A transaction, which is settled without the actual delivery.

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.

Required or prescribed by law or a rule.

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.

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.

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

A scheme whereby all computerised branches of public sector banks would accept income tax payments.

An inspection or examination of the organisations accounts by the specified persons as per the requirements of the Income Tax Act.

Computation and determination of tax less than the actual tax liability by taking advantage of loopholes in the law.

Resorting to dubious methods whereby income is understated or expenses are overstated with a view to evade tax. Tax evasion is illegal.

Arranging affairs in such a manner so as to minimise tax liability within the limits of law. Tax planning is legal.

A deduction from the amount of tax payable availed when the assessee makes the specified investments.

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.

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.

A company which has made investments by way of acquiring equity shares of a venture capital undertaking in accordance with the prescribed guidelines.

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.

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.

Natural ability of a person to perform some particular work requiring dedication and skill.

A written legal authorisation for doing something for e.g. arresting a person or searching property.

Document containing wishes of a person, the manner in which the property of the person will be divided after his death.

An individual who is actively engaged in conducting the affairs of the business or profession of the firm in which he is a partner.

It is the value of an asset after deducting accumulated depreciation.

A computer system capable of correctly processing, providing or receiving data relating to a date within and between the twentieth and the twenty-first century.