Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > Generic > Tax terms for beginners

Generic

Tax terms for beginners

Tax terms for beginners

Filing taxes for the first time is not exactly a thrilling experience for most individuals. With multiple sections, exemptions, and calculations, the Indian taxation system can seem daunting. Moreover, if you’re unaware of the different rules and terms of taxation, it’s easy to make mistakes that can lead to missed saving opportunities or penalties.

Therefore, it’s important to understand basic income tax terms so you can navigate the process with confidence. If tax-related jargon seems overwhelming, fear not – we’re here to help.

Essential tax terms & definitions for beginners

1.    Income tax return

The Income Tax Return (ITR) shows the gross taxable income of a salaried individual for the fiscal year. In simple terms, the ITR form informs the Income Tax Department about the income you have earned in the previous year or the assessment year. If your income is more than the basic exemption limit, you must file an ITR.

There are seven types of ITR forms depending on taxpayer categories:

  • ITR 1 (Sahaj): Individuals earning up to Rs. 50 lakhs from salary, pension, or other sources fill out this form.
  • ITR 2: This form applies to individuals and HUFs (​​​Hindu Undivided Family) without business or professional income.
  • ITR 3: This applies to business or professional income earners.
  • ITR 4 (Sugam): This form is for individuals using presumptive taxation schemes with income below Rs. 50 lakhs.
  • ITR 5: This ITR form is exclusively for entities like firms and trusts.
  • ITR 6: This is for companies filing income tax online without claiming Section 11 exemptions.
  • ITR 7: This form serves political parties, charitable trusts, and educational institutions.

2.    Previous Year (PY) and Assessment Year (AY)

In the basic terminology of income tax, the Previous Year simply refers to the financial year (April 1st– March 31st) for which the tax return is being filed. The year after the financial year is the Assessment Year for the taxpayer. It is the year in which your income is assessed to calculate the tax.

3.    Tax Deducted at Source (TDS)

TDS is the payment that is collected at the source of the income. The payer deducts a part of your payment as tax and deposits it directly with the government on your behalf.

It is mandated by the Income Tax Act for specific situations and simplifies tax collection by making partial payment in advance.

TDS applies to interest income and your salary. However, certain payments are exempt from TDS, such as interest on government securities and savings bank accounts, agricultural income, etc.

Employers issue a TDS certificate known as ‘Form-16’ when they deduct tax from your salary. This form serves as proof of tax compliance and fosters financial transparency.

4.    Section 80C

If you’re looking to optimize your tax liability and save money, you must be familiar with Section 80C of the Income Tax Act. This section outlines the exemptions on specific investments and expenditures, lowering your taxable income.

Section 80C provides a wide range of tax-saving opportunities through investments in instruments like the National Savings Certificate (NSC), Equity Linked Savings Scheme (ELSS), Public Provident Fund (PPF), etc. Under this section, you can claim tax deductions up to Rs. 1.5 lakh.

5.    Gross Total Income (GTI)

Calculating the GTI is the first step in your tax filing journey. GTI includes income from various sources, such as salary, gains from business or profession, income from house property, income generated from other sources, and capital gain.

6.    Net Total Income (NTI)

NTI is the final taxable income on which you have to pay taxes. It is calculated by subtracting the applicable deductions and exemptions from the GTI under Sections 80C, 80D, 80G, etc.

For example, if your GTI is Rs. 10 lakh and you claim deductions worth Rs. 1.5 lakh under Section 80C, your NTI will be Rs. 8.5 lakh. This means you’ll have to pay taxes on Rs. 8.5 lakh as per the applicable tax slab.

7.    Surcharge

The surcharge is the additional tax levied on individuals whose income exceeds the limit set by the government. It is calculated as a percentage of the total payable tax and serves as a measure to ensure the rich and poor are treated fairly.

In India, surcharges are levied on individuals with an annual income of more than Rs. 50 lakh.

8.    Tax slab

The income tax slab refers to the range of income that determines an individual’s applicable tax rate. The slabs may be revised annually and are declared by the finance minister in the Union Budget.

Individuals need to pay taxes ranging from 5% to 30% based on their annual incomes.

9.    Advance tax

Advance tax is the tax you pay before the end of the financial year based on your expected income. So, instead of paying the entire amount at the end of the year, you can pay it in regular installments to ease the financial burden. For example, for FY 2024-25, you can pay advance taxes in four specific periods:

  • Up to 15th June: 15%
  • Up to 15th September: 45%
  • Up to 15th December: 45%
  • Up to 15th March: 75%

10.Self-Assessment Tax (SAT)

Self-assessment tax is levied on individuals who have received unexpected income from sources without accounting for TCS/TDS or if they failed to account for certain income while calculating advance tax.

SAT is also applicable when an individual switches jobs and the new employer does not consider the employee’s previous salary.

Income tax glossary: Simple meanings of income tax terms

The following definitions of common tax terms in India can help you become a wise tax planner:

  1. Income: Money you earn from work, business, rent, or investments.
  2. Tax: Money paid to the government as a percentage of your income.
  3. Taxpayer: A person who annually pays income tax to the government.
  4. Financial Year: A period of 12 months, starting from April 1, in which income is earned.
  5. Assessment Year: The year when the income of the financial year is assessed and taxed.
  6. Deduction: An amount subtracted from income to reduce taxable income.
  7. Exemption: A part of income that is not taxed by law.
  8. Rebate: A reduction in the total tax payable.
  9. Taxable income: The part of income on which tax is calculated.
  10. Gross income: Total income earned before deductions and exemptions.
  11. Net income: Income left after all deductions and taxes.

Wrapping up

While income tax terms may seem daunting to a beginner, understanding the different tax terms and definitions can help you gain more control over your finances. Moreover, with a strong understanding of the various tax-saving provisions, you can reduce your tax liability and enhance your savings.

Popular Searches
Direct Selling Agents 3 lakh loan by government difference between deduction and exemption Loan Sharks what is subsidy CERSAI Charges book value of shares

FAQs

What is tax terminology?

Tax terminology refers to the various terms and concepts of taxation. For example, ITR, TDS, gross total income, surcharge, etc.

What are the 4 types of tax in India?

Taxation in India is broadly classified into direct and indirect taxes. Direct taxes include income tax. Indirect taxes include Goods and Service Tax (GST), Excise Duty and Sales Tax.

What are the most common income tax terms in India?

The most common terms of taxation you’ll come across in India include financial year, assessment year, exemption, deduction, income tax regime, tax slabs, refund, rebate, and PAN/TAN.

Where can I find a complete income tax vocabulary or tax glossary?

You can find a complete tax glossary on the official Income Tax Department website. Tax guidebooks, government portals, or trusted finance websites can also help. They explain income tax terms in simple language for easy understanding.

Why is it important to learn tax terminology before filing taxes?

You must understand the different tax terms in India to make the most of tax filing. You can use the deductions and benefits to file your returns more efficiently. Moreover, you can save time and avoid unnecessary mistakes.

What is the meaning of ‘assessment year’ in Indian income tax?

The meaning of the assessment year in Indian income tax is the year after the financial year in which your income is reviewed and taxed by the government. So, if you’re filing income tax for FY 2024-2025, the assessment year is 2025-2026.

What is the difference between exempt, deductible, and taxable income?

Exempt income is not taxed. Deductible income reduces your total income before tax. Taxable income is the remaining amount on which tax is calculated and paid to the government.

Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Copyright © 2025 Tata Capital Limited

error-icon

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download