Glossary

Plain-English definitions for the tax, GST, and compliance terms Indian CAs, businesses, and taxpayers run into most often, from PAN to transfer pricing.

63 terms

A

Advance TaxIncome tax paid in installments during the financial year itself, rather than as one lump sum after it ends, whenever your total tax liability for the year exceeds ₹10,000.

AIS (Annual Information Statement)A broader financial summary than Form 26AS, covering not just TDS/TCS but also interest, dividends, securities transactions, and other information reported to the tax department.

ArticleshipThe mandatory paid practical training that every CA student must complete under a practising chartered accountant before qualifying, currently two years under ICAI's latest scheme.

Assessment Year (AY)The year following the financial year, in which the income you earned is assessed to tax and the return is filed. Income earned in FY 2025-26 is assessed in AY 2026-27.

B

Belated ReturnAn income tax return filed after the original due date has passed, permitted up to a cut-off later in the assessment year but carrying a late fee, interest, and the loss of several entitlements.

C

CARO (Companies (Auditor's Report) Order)An order under the Companies Act requiring statutory auditors of most companies to report on specific matters, like loans, fraud, and internal controls, beyond the standard audit opinion.

Composition Scheme (GST)A simplified GST scheme for small businesses below a turnover threshold, allowing a flat, lower tax rate on turnover in exchange for giving up input tax credit.

D

DIN (Director Identification Number)A unique number every individual must obtain before being appointed as a director of an Indian company, held for life and not tied to any single company.

DPIIT RecognitionOfficial government recognition of a business as a 'startup' under the Startup India initiative, granted largely through self-certification on eligibility criteria like age, turnover, and innovation.

DSC (Digital Signature Certificate)An electronic credential that legally authenticates a person's identity for signing documents online, required for most MCA, GST, and income tax filings made on behalf of a company or LLP.

DTAA (Double Taxation Avoidance Agreement)A bilateral treaty between India and another country that prevents the same income from being taxed twice, through mechanisms like tax credits or exemptions.

E

E-Way BillAn electronic document required for transporting goods above a specified value, generated on the GST portal, that acts as proof of a valid movement of goods.

ELSS (Equity Linked Savings Scheme)A mutual fund investing primarily in equities, eligible for Section 80C deduction, with the shortest lock-in (three years) among 80C-eligible investment options.

EPF (Employees' Provident Fund)A mandatory retirement savings scheme for employees of covered establishments, with both employer and employee contributing a fixed percentage of basic salary each month.

ESI (Employees' State Insurance)A social security scheme providing medical and cash benefits to employees earning below a specified wage ceiling, funded through employer and employee contributions.

F

Financial Year (FY)India's tax and accounting year, running from 1 April to 31 March, rather than the January to December calendar year used in many other countries.

Form 15CA and 15CBA self-declaration (15CA) and, for larger or non-exempt remittances, a chartered accountant's certificate (15CB) required before making most payments to a non-resident, confirming the correct tax has been withheld.

Form 16The annual TDS certificate an employer issues to a salaried employee, summarizing salary paid and tax deducted through the year, used as the primary basis for filing a return.

Form 26ASA consolidated tax statement, linked to your PAN, showing all TDS, TCS, advance tax, and self-assessment tax recorded against you for the year.

G

GratuityA lump-sum payment from employer to employee for continuous service of five years or more, calculated under the Payment of Gratuity Act, and partly exempt from tax.

GST Returns (GSTR)Periodic filings that report a business's sales, purchases, and tax liability under GST, most commonly GSTR-1 for outward supplies and GSTR-3B for the summary tax payment.

GSTIN (GST Identification Number)The unique 15-character registration number assigned to every GST-registered entity, built from the state code and the business's PAN rather than issued at random.

H

Health and Education CessA flat 4% add-on calculated on the total of income tax plus surcharge, applied to every taxpayer regardless of income level, and earmarked for health and education spending.

HRA (House Rent Allowance)A salary component paid to cover rental accommodation costs, partly or fully exempt from tax under Section 10(13A) if you pay rent and choose the old tax regime.

HUF (Hindu Undivided Family)A separate taxable entity recognised under Hindu law, consisting of a common ancestor and their lineal descendants, that can hold assets and file its own income tax return distinct from its individual members.

I

ICAI (Institute of Chartered Accountants of India)The statutory body that regulates the Chartered Accountancy profession in India, including exams, membership, and professional conduct standards.

IFC (Internal Financial Controls)The policies and procedures a company puts in place to make its financial reporting reliable, which directors must report on and auditors of most companies must separately opine on.

Ind AS (Indian Accounting Standards)India's accounting standards converged with IFRS, mandatorily applicable to specified classes of companies based on net worth and listing status, distinct from the older Accounting Standards smaller companies still use.

Input Tax Credit (ITC)Credit for GST already paid on business purchases, which can be set off against GST payable on sales, so tax is effectively paid only on the value added at each stage.

ITR (Income Tax Return)The annual statement of income, deductions, and taxes paid that a taxpayer files with the Income Tax Department, using one of several numbered forms selected by the nature of income.

L

Long-Term Capital Gains (LTCG)Profit from selling a capital asset held beyond a specified minimum period (commonly 12 or 24 months depending on the asset), taxed at rates generally lower than short-term gains.

M

MSME (Micro, Small and Medium Enterprise)The statutory classification of enterprises by investment in plant and machinery and by turnover, which unlocks Udyam registration, priority sector lending, and the 45-day payment protection.

N

New Tax RegimeThe default income tax structure with lower slab rates but no access to most deductions and exemptions, including 80C and HRA.

NPS (National Pension System)A voluntary, market-linked retirement savings scheme regulated by PFRDA, offering an additional tax deduction beyond the Section 80C limit.

NRE Account (Non-Resident External Account)The rupee account an NRI uses for money earned abroad and remitted to India. Interest on it is exempt from Indian tax while non-resident status is maintained, and the balance is freely repatriable.

NRI (Non-Resident Indian)A residential status under Indian tax law, determined by days physically present in India during the year, that changes which income is taxable in India and which isn't.

NRO Account (Non-Resident Ordinary Account)The rupee account an NRI uses for income arising in India, such as rent, dividends, or pension. Interest on it is fully taxable in India and TDS is deducted at a high flat rate.

O

Old Tax RegimeThe original income tax structure with higher slab rates but access to deductions and exemptions like 80C, HRA, and home loan interest, still available by explicit choice.

P

PAN (Permanent Account Number)A ten-character alphanumeric identifier issued by the Income Tax Department that tracks all of a person's or entity's financial transactions under one number for life.

PerquisiteA non-cash benefit or facility an employer provides to an employee, such as rent-free accommodation or a company car, taxed as part of salary based on a specified valuation method.

PPF (Public Provident Fund)A government-backed long-term savings scheme with a 15-year term, where contributions qualify for deduction under Section 80C and both the interest and the maturity amount are exempt from tax.

Presumptive Taxation (Section 44AD/44ADA)A simplified scheme letting small businesses and professionals declare a fixed percentage of turnover as taxable profit, without maintaining detailed books or facing a mandatory tax audit.

R

Rebate under Section 87AA rebate that reduces tax liability to nil for taxpayers below a specified income threshold, currently more generous under the new regime than the old.

Residential StatusYour classification for a tax year as Resident and Ordinarily Resident, Resident but Not Ordinarily Resident, or Non-Resident, determined by days spent in India. It decides how much of your worldwide income India can tax.

Reverse Charge Mechanism (RCM)A GST arrangement where the buyer, not the seller, is liable to pay tax directly to the government, applicable to specified goods, services, and supplier categories.

Revised ReturnA corrected return filed under Section 139(5) that completely replaces the one already filed, available free of charge until the window closes or the original return is processed, whichever comes first.

RNOR (Resident but Not Ordinarily Resident)A transitional residential status, most often relevant to NRIs returning to India, under which most foreign income stays outside the Indian tax net for a limited number of years.

ROC (Registrar of Companies)The government office under the Ministry of Corporate Affairs responsible for registering companies and LLPs and overseeing their ongoing statutory filings.

S

Section 80-IACA tax holiday allowing an eligible, DPIIT-recognized startup to claim 100% deduction of profits for any three consecutive years out of its first ten years.

Section 80CA deduction of up to ₹1.5 lakh a year for specified investments and expenses like PPF, ELSS, life insurance premiums, and children's tuition fees, available only under the old tax regime.

Self-Assessment TaxThe balance tax you pay before filing your return, after accounting for TDS and advance tax already paid, to settle what you still owe for the year.

Short-Term Capital Gains (STCG)Profit from selling a capital asset held for less than the minimum long-term holding period, generally taxed at higher rates than long-term gains.

Standard DeductionA flat deduction from salary income, available without needing bills or proof, currently ₹75,000 under the new regime and ₹50,000 under the old regime.

Statutory AuditAn independent, legally mandatory audit of a company's financial statements, conducted by a chartered accountant, required for essentially all companies regardless of size or turnover.

SurchargeAn additional charge on the income tax itself, not on income, applicable once total income crosses specified high thresholds, typically starting above ₹50 lakh.

T

TAN (Tax Deduction and Collection Account Number)A ten-character number that any person or business responsible for deducting or collecting tax at source must hold, used on every TDS/TCS return and challan.

Tax Audit (Section 44AB)A mandatory audit of accounts under the Income Tax Act, triggered once a business or professional's turnover or receipts cross specified thresholds, distinct from a statutory audit.

TCS (Tax Collected at Source)Tax that a seller collects from the buyer at the time of sale for specified goods or transactions, over and above the sale price, and deposits with the government.

TDS (Tax Deducted at Source)Tax that the payer deducts upfront from specified payments like salary, rent, or professional fees, and deposits directly with the government on the recipient's behalf.

TIN (Tax Identification Number)The generic international term for a taxpayer's unique tax reference. In India, PAN performs this role for income tax, and it is the number to quote when a foreign form asks for your Indian TIN.

Transfer PricingRules requiring transactions between related entities, like a parent company and its overseas subsidiary, to be priced as if they were between unrelated parties, to prevent shifting profit to lower-tax jurisdictions.

U

Udyam RegistrationFree, self-declared registration that classifies a business as a micro, small, or medium enterprise (MSME) based on investment and turnover, unlocking MSME-specific benefits.

Updated Return (ITR-U)A return filed under Section 139(8A) to voluntarily disclose income not previously reported, available for up to 48 months from the end of the assessment year but carrying additional tax of 25% to 70%.