Important Tax Jargons You Must Know!

The income tax ecosystem in the country is not very easy to understand. If you've just started earning, understanding the tax laws and planning your taxes can be challenging due to various tax provisions. But again, it is essential to know the basics at least to make the right tax-saving investments and avoid tax errors that could lead to penalties.

To help simplify taxes, we are decoding 10 of the most common tax jargon every taxpayer should know about. Take a look -

The period during which you earn the income is known as the Financial Year (FY). In India, a Financial Year starts on April 1^st and ends on March 31^st of the following year. So, for instance, FY 2022-23 means the income-earning period that begins on April 1^st, 2022 and ends on March 31^st, 2023.

Assessment Year (AY) is the tax review year immediately following FY. It is during the AY that you pay balance taxes on the income earned in the FY and file tax returns. Thereafter, income is assessed by the tax department. 

Your Gross Total Income or GTI is the income generated under all 5 income tax heads: salary, house property, business/profession, capital gains, and other sources. GTI is calculated by adjusting the deductions / exemptions under the respective heads, like home loan interest, House Rent Allowance (HRA), etc.

Any gain or profit from the sale, disposal, or transfer of capital assets is a capital gain. In India, the period for which the asset was held, and the type of asset determine whether the capital gain is a long-term capital gain (LTCG) or short-term capital gain (STCG). Based on the criteria, the short-term and long-term capital gain tax vary.

You incur a capital loss when you sell an asset at a price lower than the purchase price. But as per the tax laws in the country, you can set off such losses only against capital gains income. However, long-term capital losses can be set off only against LTCG, whereas short-term capital losses can be set off against LTCG and STCG.

Self-assessment tax is the balance tax amount a taxpayer has to pay on the assessed income after deducting TDS, TCS and advance tax. SAT is payable after the end of the financial year.

Section 80C is the most commonly used tax deduction section. There are various 80C investment options like life insurance premium, ELSS Mutual Funds, 5-Year Tax-Saving FD, Public Provident Fund, tuition fees, etc., that taxpayers can consider to claim deductions of up to INR 1.5 lakhs in a financial year.

Employers issue Form 16 to salaried taxpayers to help them file tax returns. It contains detailed information about the income generated by the Salaried Individual, the deductions and exemptions availed, TDS, and more.

A sole proprietor or proprietorship can be defined as an autonomous business body owned and managed by one individual. It is one of the easiest-to-operate business structures and doesn’t require government registration for incorporation. The revenue generated by such businesses is treated as the personal income of the proprietor and taxed as per their income tax slab. 

The surcharge is an additional tax paid by high-income assessees over and above their income tax slab rate. For instance, under the new income tax regime, there is a surcharge of 10% if the taxable income of an individual for the FY is above INR 50 lakhs.

Read More: What are the Documents Required for Income Tax Filing?

• As a responsible citizen, you should pay your income tax and file tax returns before the deadline to avoid penalties.

• Moreover, to help taxpayers reduce their tax burden, the government offers various tax-saving options.

• You can consult a tax advisor to choose the best investment options that align with your financial objectives and reduce your tax liability.

AU Small Finance Bank, with its extensive range of banking products and services, functions as a reliable companion to help customers navigate the complex world of taxes. Whether looking for a new High-Interest Savings Account or making online tax payments online, the Largest Small Finance Bank in India can cater to your extensive banking needs.

Disclaimer -

This blog has been prepared to provide the readers with general information and understanding of relevant tax jargons. The Income tax definitions and rules keep on changing so, it is suggested that the reader should cross-check all the facts and contents of the material.

Before taking any decisions, please consult your tax advisors.