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Tax jargon simplified for you

Each year, as the income tax season rolls around, you’ve probably wondered about all the tax terminology floating around. Here’s an overview of essential tax jargon you need to know:

  • Assessee: An assessee is an individual that is liable to pay income tax. Types of assessees include normal assessees, representative assessees, deemed assessees, and assessee-in-default.
  • Previous year: Also known as the financial year, previous year refers to the 12-month period for which a person’s income is chargeable to tax. It begins on April 1st and ends on March 31st.
  • Assessment year: Assessment year is the 12-month period immediately following the previous year, also extending from April 1st to March 31st. This is when assesses need to file their return of income.
  • Heads of income: There are five heads of income (or sources of income) that are chargeable to tax. These are salary, income from house property, profits and gains from business or profession, capital gains (short-term and long-term), and income from other sources.
  • Gross total income: This is the sum total of all the earnings computed under the five heads of income, calculated after clubbing of any relevant income and adjusted for any losses that need to be carried forward or set off.
  • TDS: TDS, or tax deducted at source, is applicable on certain sources of income like salary, commission, professional fees, interest, and rent. In this system, the payer deducts a percentage of tax at the source before making the payment to the receiver.
  • Form 16: Form 16 is a certificate that employers furnish to salaried employees. The form mentions details about the salary earned during the year and about the amount of tax deducted at source.
  • Rebate: Under section 87A, an income tax rebate is offered to individuals whose income after deductions is below ₹500,000. These assessees can claim a rebate up to ₹12,500.
  • Income Tax Return (ITR): Often abbreviated to ITR, these are the forms used by assessees to furnish information about their income and the taxes paid thereon to the Income Tax Department. Different ITR forms like ITR-1, ITR-2, ITR-3, and ITR-4 are used depending on the nature of income.
  • Refunds: Tax refunds are a return of the excess income tax paid by the assessee to the government.
  • Income tax slabs: These are slabs or categories developed based on the age and the level of income of the assessee. The rate of income tax differs for each slab.
  • Surcharge: Surcharge is an additional charge payable by taxpayers whose taxable income is above a specified limit.
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