CMA Inter Paper 7 (DITX) key terms

The financial year in which income is actually earned and taxed in the following year; it precedes the assessment year and generally runs from 1 April to 31 March.

The twelve-month period immediately following the previous year, in which the income of that previous year is assessed and taxed under the Income-tax Act.

The classification of a person as resident or non-resident, and if resident, ordinarily or not ordinarily resident, determined by days of stay and other criteria for a previous year.

The two day-count tests (182 days in the previous year, or 60 days in the previous year plus 365 days in the preceding four years) used to decide whether an individual is resident.

A resident individual or HUF who fails the additional stricter stay tests, so foreign income is taxed only if it arises from a business controlled in or profession set up in India.

A flat annual deduction from salary income, capped at a statutory limit, allowed in place of itemised expenses; the amount and cap are revised by successive Finance Acts.

The least of actual HRA received, rent paid minus one-tenth of salary, and half (metro) or two-fifths (non-metro) of salary, available only where rent is actually paid.

Remuneration for services rendered under an employer-employee relationship, including wages, allowances, perquisites and profits in lieu of salary, taxed on due or receipt basis, whichever is earlier.

A non-cash benefit or facility provided by an employer to an employee, such as rent-free accommodation or a car, valued under prescribed rules and added to taxable salary.

The notional figure on which house property income is computed: the higher of expected rent and actual rent received, subject to municipal taxes and the statutory deduction.

Local body levies on property that the owner actually bears during the year; they are deducted from gross annual value before the flat percentage deduction is applied.

A flat 30% of net annual value allowed to every owner as a notional allowance for repairs, collection and other expenses, regardless of actual expenditure.

The reduction in annual value when a property remains unoccupied during part of the year, computed as expected rent less actual rent received for the vacant period.

Rent that the owner was entitled to but could not recover, deducted from annual value if prescribed conditions on tenancy and recovery efforts are satisfied.

A group of depreciable assets of the same class and rate, to which additions are pooled and from which sale proceeds are reduced to compute depreciation.

The opening book value of a block of assets reduced by depreciation allowed and adjusted for additions and sale proceeds; it drives depreciation and short-term capital gain calculations.

A statutory allowance for the wear and tear of business assets, computed on the written down value of the block at prescribed rates, and allowed only if the asset is used in business.

A simplified scheme taxing eligible small businesses and professionals on a prescribed percentage of turnover or gross receipts, relieving them from maintaining detailed books.

The records of receipts, payments, sales, purchases and stock that a business or profession must maintain where income exceeds prescribed thresholds or specified conditions apply.

A mandatory audit of accounts by a chartered accountant where turnover or gross receipts exceed the statutory limit or where specified conditions are breached, reported in the prescribed form.

Property of any kind held by an assessee, including securities and immovable property, but excluding stock-in-trade, personal effects, agricultural land in specified areas and certain specified bonds.

Gain on transfer of a capital asset held longer than the prescribed holding period, taxed at concessional rates with indexation or without, depending on the asset class.

Gain on transfer of a capital asset held for not more than the prescribed holding period, taxed at the normal slab or a special rate as applicable.

The amount paid to acquire a capital asset, adjusted for improvements and, where eligible, replaced by the fair market value on a statutory cut-off date.

Adjustment of the cost of acquisition and improvement by the notified cost inflation index so that gains reflect real, not nominal, appreciation over the holding period.

The residual head covering income not taxed under salary, house property, business or capital gains, such as interest, dividends, royalties and winnings.

Windfall receipts such as lotteries, crossword puzzles, card games and betting winnings, taxed at a flat special rate without any deduction or set-off of losses.

Distribution of profits by a company to its shareholders, taxed in the shareholder's hands as income from other sources, with limited deduction for interest on borrowed funds.

The aggregate of income computed under all five heads after intra-head adjustments and set-off of carried-forward losses, before any Chapter VI-A deductions.

Gross total income reduced by eligible deductions under Chapter VI-A and rounded off to the nearest ten rupees; it is the base on which tax is computed.

Specified deductions from gross total income for items such as life insurance premia, pension contributions, medical insurance and specified donations, subject to caps and conditions.

The prescribed form in which an assessee declares income, deductions, taxes paid and other particulars for an assessment year within the due date.

The process under which tax is paid by the assessee on the basis of the return, after adjusting prepaid taxes, before the department issues any demand.

Tax paid in instalments during the previous year on income other than salary, based on estimated or presumptive income, with interest for shortfall or deferment.

A mechanism requiring the payer of specified incomes to withhold tax at prescribed rates and remit it to the government, crediting the payee's account.

A mechanism requiring a seller of specified goods or remitter of specified amounts to collect tax from the buyer or remitter and deposit it with the government.

Arranging affairs within the letter and spirit of the law, using exemptions, deductions and incentives, to reduce the legitimate tax burden without concealment or artificial devices.

Reducing tax through arrangements that exploit loopholes in the law; technically legal but contrary to legislative intent, and often countered by general anti-avoidance rules.

Illegal reduction of tax by concealment of income, inflation of expenses, false claims or non-disclosure, attracting penalties and prosecution under the Act.

A statutory provision allowing the tax authority to disregard an arrangement whose main purpose is a tax benefit and which lacks commercial substance or is otherwise impermissible.

The pricing of transactions between associated enterprises, which must be at arm's length and supported by prescribed documentation and methods.

The price that unrelated parties would have charged in comparable uncontrolled transactions; the benchmark against which related-party international transactions are tested.

An entity linked to another through shareholding, control, management or family relationships as defined, triggering transfer pricing and related disclosure obligations.

A bilateral treaty allocating taxing rights between two countries and providing relief from double taxation through exemption or credit mechanisms.

A document issued by the tax authority of a treaty partner confirming residence, required to claim treaty benefits and often accompanied by a prescribed form.

The credit of GST paid on inward supplies of goods or services used for business, set off against output tax, subject to eligibility and documentary conditions.

The GST charged by a registered supplier on outward supplies, against which eligible input tax credit is set off to arrive at net tax payable.

A system where the recipient, not the supplier, is liable to pay GST on specified notified supplies or when purchasing from an unregistered person in defined cases.

The statutory location that determines whether a supply is intra-state or inter-state and therefore whether CGST-plus-SGST or IGST applies.