Glossary · 25 terms
Taxation
All taxation terms in the EquitiesIndia.com glossary — plain-English definitions written for Indian retail investors.
Advance Tax(Advance Income Tax)
Advance Tax is the income tax payable in instalments during the financial year itself — rather than as a lump sum at the time of filing — mandated under Section 208 of the Income Tax Act when estimated tax liability for the year exceeds ₹10,000.
Annual Information Statement(AIS)
The Annual Information Statement (AIS) is a comprehensive statement introduced by the Income Tax Department in November 2021 that consolidates all financial information reported about a taxpayer from multiple sources — including securities transactions, mutual fund redemptions, dividend credits, and foreign remittances — enabling pre-filling and verification for ITR filing.
Assessment Year(AY)
The Assessment Year (AY) is the 12-month period from April 1 to March 31 during which income earned in the preceding Financial Year is assessed and taxed; for example, income earned in FY 2024-25 (April 2024 to March 2025) is assessed in AY 2025-26.
Buyback Tax(Share Buyback Tax)
Buyback Tax is the tax levied on share buybacks conducted by Indian companies; Budget 2024 shifted the tax incidence from the company (which previously paid a 20% buyback tax under Section 115QA) to shareholders, who now pay capital gains tax on buyback proceeds received.
Capital Gains(Capital Gains Tax)
Capital Gains is the profit arising from the transfer of a capital asset — such as shares, mutual fund units, real estate, gold, or bonds — and is classified as long-term or short-term under the Income Tax Act, 1961 based on the holding period of the asset.
Carry Forward of Losses(Carry-Forward Loss)
Carry forward of losses allows taxpayers to transport unabsorbed capital losses from the current financial year to subsequent years under Section 74, where they can be set off against future capital gains — LTCL for up to 8 years against LTCG only, and STCL for up to 8 years against both STCG and LTCG.
Cess(Health and Education Cess)
Cess is a 4% surcharge on income tax and surcharge (Health and Education Cess) levied on all taxpayers under the Finance Act, applicable universally regardless of income level, and not shared with state governments unlike regular taxes.
Cost Inflation Index(CII)
The Cost Inflation Index (CII) is a government-notified index used to adjust the purchase price of a capital asset for inflation, thereby reducing the taxable capital gain under the indexation method available for specified long-term assets under Section 48 of the Income Tax Act.
Dividend Tax(Dividend Income Tax)
Dividend Tax refers to the income tax payable by shareholders on dividend income received from Indian companies, re-classified as taxable income in the hands of recipients following the abolition of the Dividend Distribution Tax (DDT) by Budget 2020.
Financial Year(FY)
The Financial Year (FY) in India runs from April 1 to March 31 and is the accounting period in which income is earned, investments are made, and transactions occur for the purpose of income tax computation under the Income Tax Act, 1961.
Form 26AS(Annual Tax Statement)
Form 26AS is the consolidated tax credit statement maintained by the Income Tax Department that reflects all TDS deducted, TCS collected, advance tax paid, and self-assessment tax paid against a taxpayer's PAN for a given financial year.
Grandfathering (LTCG)(LTCG Grandfathering)
Grandfathering in the LTCG context refers to the protection of unrealised long-term capital gains on listed equities and equity mutual funds that accrued up to January 31, 2018 — the day before the LTCG tax was reintroduced by Budget 2018 — with gains up to that date deemed tax-free.
Indexation(Indexed Cost)
Indexation is a method of adjusting the purchase cost of a capital asset upward for inflation using the Cost Inflation Index, thereby reducing the taxable long-term capital gain and the resulting tax liability under Section 48 of the Income Tax Act.
ITR-2(Income Tax Return Form 2)
ITR-2 is the income tax return form applicable to individuals and HUFs who have capital gains income, foreign assets, or more than one house property, but who do not have income from business or profession.
LTCG(Long-Term Capital Gains)
Long-Term Capital Gains (LTCG) is the profit earned from the transfer of a capital asset held for more than the prescribed holding period — 12 months for listed equities and equity mutual funds — and is taxed at 12.5% (post-Budget 2024) above an annual exemption threshold of ₹1.25 lakh.
New Tax Regime(New Income Tax Regime)
The New Tax Regime, introduced by Budget 2020 under Section 115BAC and made the default regime from AY 2024-25, offers lower slab rates — including zero tax up to ₹3 lakh and a 30% peak rate above ₹15 lakh — in exchange for foregoing most deductions and exemptions including Section 80C and 80D.
NRI Taxation(Non-Resident Indian Taxation)
NRI Taxation refers to the income tax treatment of Non-Resident Indians under the Income Tax Act, 1961, where only India-sourced income (capital gains on Indian securities, rental income, interest from Indian accounts) is taxable in India, often subject to higher TDS rates and DTAA benefits.
PAN(Permanent Account Number)
Permanent Account Number (PAN) is a 10-character alphanumeric identifier issued by the Income Tax Department under Section 139A of the Income Tax Act, serving as the universal identifier for all financial and tax transactions in India.
Section 80C(80C deduction)
Section 80C of the Income Tax Act, 1961 allows individual taxpayers and HUFs to claim a deduction of up to ₹1.5 lakh per financial year on specified investments and expenditures, including ELSS mutual funds, PPF, EPF, life insurance premiums, and home loan principal repayment.
Section 80D(80D deduction)
Section 80D of the Income Tax Act, 1961 provides a deduction on health insurance premiums paid for self, family, and parents — up to ₹25,000 for self and family, and an additional ₹25,000 (₹50,000 for senior citizens) for parents — available only under the Old Tax Regime.
Set-Off of Losses(Tax Loss Harvesting)
Set-off of losses is the mechanism under Sections 70–74 of the Income Tax Act allowing taxpayers to reduce taxable income or capital gains in the current year by netting eligible losses incurred in the same financial year against eligible gains.
STCG(Short-Term Capital Gains)
Short-Term Capital Gains (STCG) is the profit on transfer of a capital asset held for less than the prescribed holding period; for listed equities and equity funds subject to STT, Budget 2024 revised the STCG tax rate to 20% effective July 23, 2024.
STT(Securities Transaction Tax)
Securities Transaction Tax (STT) is a direct tax levied on transactions in listed securities on recognised Indian stock exchanges, introduced by the Finance Act 2004 and currently applicable at rates ranging from 0.001% to 0.02% depending on the instrument and transaction type.
Surcharge(Income Tax Surcharge)
Surcharge is an additional levy imposed on income tax (not on income) payable by individuals with income exceeding specified thresholds — ranging from 10% (income ₹50 lakh–₹1 crore) to 25% (income above ₹5 crore under the New Tax Regime) — effectively increasing the tax burden for higher-income taxpayers.
TDS(Tax Deducted at Source)
Tax Deducted at Source (TDS) is a mechanism under the Income Tax Act, 1961 where the payer deducts a specified percentage of tax before making payments for salary, interest, dividends, rent, professional fees, and other specified incomes, and remits it directly to the government on behalf of the recipient.