Tax Terminologies: Basic Jargons of Income Tax in India

Taxes are a fundamental part of any nation's financial system. However, understanding income tax can be daunting, especially with the myriad of terms and jargon used in the tax system. This guide breaks down the basic concepts of income tax in India and explains 10 key tax-related terms to help you confidently navigate the tax system's complexities.

What is the basic income tax concept in India?

Income tax is a direct tax levied by the government on the income earned by individuals and entities within a financial year. It's a mandatory obligation for those who meet certain income thresholds, with rates varying based on income brackets. The government uses the collected tax to fund public services, infrastructure development, and other national expenditures.

10 key terms frequently used about taxes in India

1. Gross Total Income: This refers to your total income before any deductions are applied.
2. Taxable Income: This is the income arrived at after subtracting allowable deductions from your gross total income. You pay tax on this amount.
3. PAN Card: The Permanent Account Number (PAN) is a unique ten-digit alphanumeric identifier assigned to taxpayers. It's essential for filing tax returns and conducting financial transactions.
4. Assessment Year (AY): The AY refers to the financial year for which your income tax is assessed. It starts on April 1^st and ends on March 31^st of the following year.
5. Deductions: Specific amounts that can be subtracted from gross total income under sections like 80C, 80D, etc., reducing the taxable income.
6. Exemptions: Exemptions are certain types of income that are completely excluded from taxation under specific sections of the Income Tax Act.
7. Tax Brackets: These are slabs of income with assigned tax rates. The higher your income, the higher the tax bracket you fall under, resulting in a higher tax rate.
8. TDS (Tax Deducted at Source): Employers and other entities deduct tax at source (TDS) from certain payments like salaries, interest on investments, and rent. This deducted amount is deposited with the government on your behalf.
9. Tax Return (ITR): An income tax return (ITR) is a document filed with the Income Tax Department that details your income, deductions, taxes paid, and tax liability for a particular assessment year.
10. Form 16: A certificate issued by an employer detailing the TDS on salary, used for filing income tax returns.

How and when to pay tax in India?

Taxes can be paid either in advance through Advance Tax or when filing returns. Typically, the tax payment process involves calculating the total tax liability, subtracting any TDS and advance tax already paid, and paying the remaining amount.

The due date for filing income tax returns is usually July 31^st of the assessment year, although this date can vary depending on government announcements.

Also, in addition to the traditional cheque posting for taxes, now, online tax payment via the Income Tax Department's portal is a popular and convenient method.

Endnote

Whether you're a salaried individual or a self-employed businessman, we hope that by familiarising yourself with these key jargon, you can better manage your tax obligations, ensure compliance, and optimise your tax savings.

FAQs

What are the 5 taxes in India?

The 5 main taxes in India are Income Tax, Goods and Services Tax (GST), Property Tax, Wealth Tax, and Corporate Tax.

What is tax called in India?

In India, tax is commonly referred to as "Kar" in Hindi, and it encompasses various levies like Income Tax, GST, and more.

Who pays 30% tax in India?

In general, individuals earning over ₹15 lakhs annually are subject to a 30% income tax rate under the 2024 new tax regime in India.

How is tax calculated in India?

Tax in India is calculated based on taxable income after applying applicable deductions, exemptions, and slab rates for the relevant financial year.

How to pay zero tax in India?

To pay zero tax in India would be subjective to various factors, including one's total income, the sources of income, investments, and more. We recommend consulting a qualified accountant to discuss minimizing your taxes. 

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