NRI Income Tax Compliance

30+ Important Income Tax Terms in India You Need to Know

Shubham Jain
Written by Shubham Jain
Updated on: July 20, 202618 mins Editorial Standards
30+ Important Income Tax Terms in India

Income tax plays a very important role for every working individual in India. Regardless of whether you are a business owner, salaried employee, or freelancer, you must understand income tax to manage your finances and stay compliant with the law. However, the various terms used in the income tax forms and regulations can confuse newcomers.

Even common terms like capital gains, exemptions, TDS, and rebates may seem confusing, but if you understand their meanings, the entire tax filing process can be easy. If you understand the important terms properly, you can both save time and take advantage of all the government-permitted benefits and deductions.

According to the Income Tax Act, 1961, every citizen who earns more than a certain amount needs to file their taxes every year. In this blog, we will understand the 30+ key terms related to Income Tax in India.

Key Takeaways
  • Understanding the key terms like financial year, assessment year, gross total income, and total income is important to ensure smooth tax filing.
  • TDS, advance tax, and self-assessment tax are different, and each refers to a different stage of tax payment. Knowing the difference helps you avoid any errors and claim the right credits.
  • Exemptions, rebates, and deductions are often confused, but all three serve different purposes. All three can help you reduce your tax when used correctly.
  • Short-Term and Long-Term Capital Gains are taxed differently based on how long the asset was held. Misreporting these is a common filing mistake.

The table below lists 30+ key terms about income tax in India that can help you stay informed throughout the tax season, irrespective of whether you are filing for the first time or you just wish to refresh your knowledge.

No. Terms Simple Meaning
1 Financial Year (FY) It is the year in which you earn income, starting from April 1st to March 31st.
2 Assessment Year (AY) It is the year following the financial year in which the income is estimated for tax.
3 Previous Year This is another term for the financial year in which the income is earned.
4 Taxpayer Any person or entity that is liable to pay tax
5 Gross Total Income The total income before making any deductions
6 Total Income Income after claiming all the deductions under the Income Tax Act.
7 Tax Deducted at Source (TDS) Tax is deducted from income while making the payment
8 Advance Tax Tax paid in instalments before the financial year ends
9 Self-Assessment Tax It is the tax paid before filing the return and after considering TDS and advance taxes
10 Exemption Income that is not included in total taxable income
11. Deduction Income reduced/deducted from gross income for certain expenses or investments
12. Rebate Deduction in the overall tax payable
13. Relief Tax benefit to prevent double taxation
14. Return of Income (ITR) It is the form filed to report income and taxes paid.
15. Tax Audit Verifying books of accounts to ensure compliance
16. Capital Gains Profits received from the sale of capital assets
17. Short-Term Capital Gains (STCG) Gains acquired from assets held for a short time
18. Long-Term Capital Gain (LTCG) Gains acquired from the sale of assets held for a longer time.
19. House Property Income Income received from an owned property
20. Salary Income Income earned from employment
21. Income from business or profession Income acquired from trade, business, or profession
22. House Rent Allowance (HRA) The allowance offered to employees to cover rent expenses
23. Income from other sources Incomes that are not covered under other heads
24 Standard deduction Fixed amount of deduction given to salaried taxpayers
25. Form 26AS Tax credit statement that reflects TDS, refunds, and advance tax
26 Form 16 TDS certificate issued by employers
27 PAN (Permanent Account Number) It is a unique identity used for tax purposes
28 Aadhaar-linking Linking aadhaar with PAN for tax compliance
29 Assessing Scrutiny The tax department conducting a detailed examination of an ITR
30 Rectification Request Request to make corrections for any errors in the ITR
31. Tax Refund It is a refund given by the department for excess tax paid
32 Due Date Final date to file the ITR
33 AIS (Annual Information Statement) Much more useful today than Form 26AS.
34 Form 15CA Important for NRIs.
35 Form 15CB Important for NRIs.
36 DTAA Especially for NRIs.
37 Section 80C Income Tax Deduction
38 Section 80D Income Tax Deduction (Medical)
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To Conclude

You must understand these important income tax terms in India to stay informed and make the tax filing process easier. This will also help you avoid any mistakes and ensure you take advantage of the available tax deductions, exemptions, and benefits. Whether you are a first-time filer or simply want to brush up your knowledge, understanding these terms can help you a lot, and income tax will not feel intimidating.

Moreover, if you need expert assistance with filing your ITR, contact an expert at Savetaxs. Our team can help you file your returns with 100% accuracy, confidence, and compliance. Contact us right away, as our team is actively working 24/7 across all time zones.

Glossary
  • Assessment Year (AY): The Assessment Year is When Taxes on the Previous Year's Income Are Evaluated, Calculated, and Filed.
  • Income Tax: Income Tax, a Type of Direct Tax, is Imposed by the Government on the Income of Individuals or Organisations.
  • Income Tax Act: Income Tax Act, an Act to Manage and Govern the Direct Taxes, by Levying, Collecting, and Administering.
  • Income Tax Return: Income Tax Return, Filed by Taxpayers, Contains a Formal Record of the Collected Tax by the Government.
  • Self-Assessment Tax: Self-Assessment Tax, filed at the end of FY, paid after deducting the advance tax and TDS
  • Income Tax Rebate: Understand Section 87A rebate limits under old and new tax regimes and eligibility conditions.
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Note: This guide is for information purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult either a CA, CS, CPA or a professional tax expert from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.

About Author
Shubham Jain
Shubham Jain Founder & NRI Tax Advisor

Shubham Jain is the Founder of SaveTaxs and has extensive experience in Indian and NRI taxation. He advises individuals, NRIs, and businesses on tax filing, tax planning, capital gains, DTAA benefits, fund repatriation, and compliance matters. He regularly writes about taxation and related financial topics. His focus is on making complex tax concepts easy to understand. Through his articles, he helps taxpayers stay informed, avoid common mistakes, and stay compliant with Indian tax laws. See Full Bio

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Frequently Asked Questions

FY is the year in which you earn the income (April 1 to March 31), while AY is the next year in which that income is assessed and taxed.

In income tax, the previous year is another term for the financial year in which the income is earned. It means it is the year preceding the assessment year. 

Gross total income is your income before any deduction, and total income is the amount after deduction on which you calculate taxes. 

TDS stands for Tax Deducted at Source. It is the tax deducted by the payer (e.g., employer, bank) at the time of making specified payments like salary or interest.

Advance tax is the income paid in installments during the year if your estimated tax liability exceeds the specified threshold.