Taxation

198 terms · each links to a full explanation with a worked example and the exam traps

Accrued interest in sale considerationInterest that has built up on a bond but not yet been paid out, bundled into its sale price — taxed as interest income and then stripped back out of the price before computing capital gains, so it is not taxed twice.
Accumulated profitsA company's built-up reserves of profit — the source that, under Section 2(22), turns certain distributions to shareholders (bonus debentures, buy-back proceeds, a shareholder loan) into taxable deemed dividend.
Accumulation of incomeThe Section 11 mechanism letting an NPO carry forward income it did not apply to its objects — up to 5 years, or to the year of receipt — provided it files the required forms and invests as specified.
Adjusted gross total incomeGross total income reduced by tax-exempt income and amounts already eligible for other Income Tax Act deductions — the base against which the 10% cap on certain Section 80G donations is calculated.
Adjustment of exemption limitA rule letting a resident individual or HUF use up any unused basic exemption limit against long-term capital gains (Sections 112, 112A) or 20% short-term gains (Section 111A), reducing the tax on those gains.
Advance taxTax paid during the financial year itself, rather than after it ends — mandatory once the total tax liability for the year exceeds Rs 10,000, which catches most profitable ETIRD traders.
Allotment dateThe date shares are actually credited to an employee under an ESOP — distinct from the vesting date and the exercise date, and the date from which the period of holding for capital gains is counted.
Alternate Minimum TaxA floor tax on non-corporate assessees — 18.5% of adjusted total income, 15% for a co-operative society — payable when it exceeds their normal tax, with the excess carried forward as credit for 15 years.
Amalgamating and amalgamated companyThe two sides of a merger recognised under the Income Tax Act — the amalgamating company (or companies) that cease to exist, and the amalgamated company that receives their property, liabilities and shareholders.
AmalgamationThe Income Tax Act's term for a merger where property, liabilities and at least 75% of shareholders by value carry across — a qualifying amalgamation lets shareholders swap shares tax-free at the point of merger.
Annual valueThe notional rental value on which income from house property is taxed — nil for self-occupied property, reasonable expected rent for deemed let-out, and the higher of that or actual rent if let out.
Anonymous donationA donation whose donor's identity is not available; taxable at a flat 30% when received by a charitable NPO, other than one established wholly for religious purposes.
Application of incomeUnder Section 11, the requirement that an NPO spend at least 85% of its yearly income on its charitable objects; the shortfall can be accumulated and applied within 5 years under conditions.
Assessee (Section 2(7))Section 2(7)'s term for a person liable to pay tax or any other sum under the Income Tax Act, and for anyone against whom a proceeding under the Act — over income, loss or refund — has been started.
Assessment year (Section 2(9))The 12-month period beginning 1 April, defined by Section 2(9), in which income earned in the preceding previous year is assessed and taxed — for FY 2021-22, the assessment year is 2022-23.
Attributable expensesThe expenses a taxpayer may deduct while computing income from other sources — collection charges, interest on borrowed funds and similar costs incurred wholly and exclusively to earn that income.
BEPSThe OECD's Base Erosion and Profit Shifting project — 15 action plans against global tax avoidance, whose Action Plan 15 produced the Multilateral Instrument that rewrites India's tax treaties.
BIPAA treaty between India and another country used by offshore fund sponsors to choose a jurisdiction giving their investors fair treatment and capital repatriation protections in India.
Bonus strippingBuying units shortly before a bonus issue and selling the originals at the halved NAV to manufacture a capital loss — a loss the Income Tax Act disallows inside a defined 3-month and 9-month window.
Bracket managementUsing tax-free or tax-adjusted income in retirement to stop taxable income from crossing into the next, higher income-tax slab.
Capital asset (Section 2(14))Section 2(14)'s wide definition of what can generate a capital gain — property of any kind held by an assessee — narrowed by exclusions for stock-in-trade, personal effects and rural agricultural land.
Capital Gains Account SchemeA deposit scheme letting a taxpayer claim a capital gains exemption (Sections 54, 54B, 54D, 54F, 54G) even if reinvestment is not done before the tax return is due, by parking the unused gain in a designated account.
Carry forward of business lossTaking an unabsorbed business loss — including a loss on exchange traded derivatives — into later years: up to 8 assessment years, against business income only, and only if the return was filed by the due date.
Carry forward of lossesUsing a loss not absorbed in the current year against income of later years. For F&O losses in PMS: up to 8 assessment years, and only against business income.
Cash systemOne of the two accounting methods Section 145 permits — income, including interest on securities, is taxed only when actually received, not when it accrues, as under the alternative mercantile system.
CBDTThe Central Board of Direct Taxes — the body under the Ministry of Finance to which administration of the Income Tax Act is assigned, and which issues the Circulars and Notifications that interpret it.
CessAn additional levy charged on top of income tax plus surcharge, ring-fenced for a specific government purpose such as health and education, rather than added to general revenue.
Clubbing of incomeSections 60 to 64 add someone else's income to yours — the Act's answer to families who move income to a lower-taxed relative while keeping the asset.
Collection chargesA deduction allowed against gross interest from securities when computing taxable income from other sources, alongside interest on borrowed money and other expenses incurred to earn that income.
Commodity Transaction TaxA transaction tax on non-agricultural commodity derivatives — 0.01% on the sale of a futures contract, paid by the seller, with separate rates for options.
Composite rental incomeRent received for letting out plant, machinery or furniture together with a building — taxed under income from other sources, as a separate line from renting the equipment alone.
Consolidating and consolidated schemeThe mutual fund merger pair — the consolidating scheme is merged away, the consolidated scheme is merged into — where the exchange of units is not treated as a transfer for tax.
Consolidating planThe same transfer exemption as a scheme merger, but applied one level down — to merging two plans within a single mutual fund scheme, such as combining sub-plans of the same fund.
Consolidation of sharesA company merging several of its shares into fewer, higher face-value shares without changing total share capital — not treated as a transfer, so the old cost of acquisition is simply apportioned.
Control and managementThe test that fixes a Hindu Undivided Family's residential status: a HUF is resident in India unless the control and management of its affairs is situated wholly outside India.
Corpus donationA donation received with a specific direction that it form part of an NPO's corpus fund, which is exempt from tax provided it is invested in specified investments.
Cost apportionment on split or consolidationThe rule for spreading an original cost of acquisition across new shares after a stock split or consolidation — proportionately, so the total cost paid never changes, only how it is divided.
Cost Inflation IndexAn index notified by the CBDT each year, with 2001-02 as the base of 100, used to restate the cost of a long-term capital asset in current rupees so that inflation is not taxed as capital gain.
Cost of acquisitionWhat an assessee is treated as having paid for a capital asset — usually the price actually paid, but overridden by special rules for bonus shares, ESOPs, gifts and inherited assets.
Cost of improvementCapital expenditure incurred on or after 1 April 2001 on additions or alterations to a capital asset, by the owner or a previous owner, deducted along with cost of acquisition in computing capital gains.
CTT exemptionUnprocessed agricultural commodity derivatives are exempt from Commodities Transaction Tax, while processed ones — sugar, guar gum and soya oil among them — stay taxable, alongside all metal and energy derivatives.
CTT on exerciseCommodities Transaction Tax charged on the purchaser, not the seller, when an option is exercised — 0.0001% of settlement value into futures or delivery, or 0.125% for any other settlement mode.
Deemed credit ruleUnder Section 115UB, income an AIF earns but has not actually paid or credited to investors by year-end is still treated as credited to them on the last day of that year, in their entitled proportion.
Deemed dividend (Section 2(22))Company payouts not called a dividend but taxed as one under Section 2(22) — liquidation and capital-reduction distributions, a closely-held company's loan to its shareholder, and buyback proceeds.
Deemed let-out propertyA house property that is not actually let out but is taxed as if it were, on its reasonable expected rent, because the owner has already chosen two other houses as self-occupied.
Deemed ownerSomeone taxed as the owner of a house property despite not holding legal title — a co-operative housing society member, or someone who transferred the property to a spouse or minor child.
Deemed resident (Section 6(1A))An Indian citizen treated as resident purely because Indian income exceeds Rs 15 lakh and no other country taxes them by domicile or residence — regardless of how many days they actually spent in India.
Deferment of taxesThe advantage of the growth option: scheme income is tax-exempt and capital gains are taxed only when units are sold, so returns compound for years before any tax is paid.
Depreciable assetA business asset on which depreciation has been claimed under the Income Tax Act — any gain on selling one is always short-term capital gain, however many years it was actually held.
Determinate trustA trust whose beneficiaries and their beneficial interests are ascertainable from the trust deed throughout its life — the structure that lets a Category III AIF avoid MMR on non-business income.
Distributable Net IncomeThe portion of a trust's income allotted to its beneficiaries and taxed in their hands, computed as taxable income minus capital gains plus tax exemptions.
Dividend Distribution TaxThe tax a mutual fund scheme itself deducted before paying a dividend, abolished from April 2020 — since when the payout has instead been taxed in the investor's own hands at their slab rate.
Double add-backWhen an employer's NPS contribution above Rs 7.5 lakh is added to salary twice over — once as ordinary salary income, once as a perquisite — while only one deduction is ever allowed against it.
Double Taxation Avoidance AgreementA treaty between two or more countries that prevents the same income being fully taxed twice, either by allocating the taxing right or by the residence country giving credit for tax paid at source.
EEE tax regimeA tax treatment where contributions, returns and (largely) withdrawals are all exempt from tax — the category the NPS is described as falling under, though its exit stage carries some conditions.
EETA tax pattern where an investment is exempt going in and exempt while it grows, but taxed only when it is withdrawn or transferred — the workbook's own example is ELSS.
Effective rate of taxThe actual tax paid as a percentage of income — not a defined term in the Income Tax Act, but total tax including surcharge and cess, divided by total income.
Eligible start-upA company or LLP meeting Section 80-IAC's conditions — incorporated between April 2016 and April 2024, turnover under Rs 100 crore, certified by the Inter-Ministerial Board — the gate for ESOP tax deferment.
Employee Stock Option PlanA right, not an obligation, for an employee to buy employer shares at a pre-fixed price — taxed twice: as a salary perquisite on exercise, and as capital gains on eventual sale.
Equity-oriented fundA fund that puts at least 65% of its proceeds into listed domestic equity shares — the tax definition that unlocks the 12.5% long-term rate and the Rs 1,25,000 annual exemption.
Equity-oriented Investment FundA Category III AIF that invests over 65% (or 90% via another fund) of its proceeds in listed domestic equity shares — taxed at 20% short-term and 12.5% long-term capital gains rates, per SEBI's AIPAC.
ETEA tax pattern where an investment is exempt going in and exempt on withdrawal, but the returns it earns along the way are taxed — the workbook's examples are tax-saving bank FDs and the Senior Citizen Savings Scheme.
ExchangeMutually swapping one asset for another, neither side being money — one of the modes of transfer under Section 2(47), and therefore ordinarily a taxable capital-gains event.
Exchange as transferConverting preference shares into equity shares of the same company meets the definition of an exchange, yet Section 47(xb) specifically excludes it from capital gains — cost and holding period simply carry over.
Expenditure in connection with transferCosts incurred wholly and exclusively to complete a transfer — brokerage, stamp duty, registration and legal fees — deductible from capital gains, but STT and CTT are specifically barred.
Extinguishment of rightsWhen a person's rights in a capital asset are legally extinguished, that counts as a transfer — but if the asset itself is simply lost or destroyed, no capital loss arises, because that is not "extinguishment of rights."
Farmer and FPO fundA dedicated exchange fund, credited with the SEBI turnover fee forgone on agri-commodity derivatives, used exclusively to help farmers and FPOs participate in that market.
FIFO methodThe rule that securities sold from a demat account are deemed to be those that entered the account first — which fixes both their period of holding and their cost of acquisition for capital gains.
Final dividendA dividend declared at the AGM, taxable in the shareholder's hands in the year it is declared — unlike an interim dividend, which is taxed only in the year it is actually made available to the shareholder.
Five heads of incomeEvery rupee of taxable income in India falls under one of five heads — salary, house property, business or profession, capital gains, or other sources — and total income is their sum.
Forfeited advance moneyAdvance money a seller keeps when a buyer walks away from a deal to transfer a capital asset is taxed upfront as income from other sources, in the year it is forfeited.
Forfeiture of warrant premiumThe upfront payment a share warrant holder loses by not exercising the warrant within 3 months of paying full consideration gets no tax treatment at all — the loss is simply ignored.
Form 10BEThe certificate an NPO registered under Section 12AB must issue to a donor to support that donor's Section 80G deduction claim, as required by Rule 18AB of the Income Tax Rules.
Form 16AThe TDS certificate a portfolio manager issues for tax deducted at source on a client's dividend and interest income, part of the regular tax reporting a PMS provider must give investors.
F&O turnoverThe ICAI-prescribed turnover figure for futures and options trading — the sum of favourable and unfavourable differences plus option premium received — that decides whether a tax audit or presumptive scheme applies.
Full value of considerationThe amount received or receivable for transferring a capital asset — usually the actual sale price, but replaced by fair market value in specific situations the Act names, such as unquoted shares sold below value.
GAAR testThe two-part test for an impermissible avoidance arrangement: the main purpose must be to obtain a tax benefit, and the arrangement must carry at least one of four tainted elements.
General Anti-Avoidance RulesChapter X-A provisions of the Income-tax Act, applying to income arising on or after 1 April 2017, letting the tax authorities deny the benefit of an arrangement that lacks commercial substance and exists mainly for tax.
General public utility objectThe widest limb of charitable purpose; where an NPO relies on it, income from any trade or business activity must not exceed 20% of its total receipts for the year, or the exemption is lost.
Gift of securitiesShares or securities received without payment, or for less than fair market value, are taxable as income from other sources once the gain crosses Rs 50,000 a year — unless the giver is a specified relative.
Goods and Services TaxA destination-based tax on consumption, levied at every stage from manufacture to final consumption, with credit for tax paid at earlier stages available as setoff so that only value addition is taxed.
GrandfatheringThe Budget 2018 provision that kept long-term gains on equity funds accrued up to 31 January 2018 tax-free, by treating the value on that date as the base for computing taxable gain.
Gratuity exemption (Section 10(10))Gratuity received on retirement is fully exempt for government employees, and for others is exempt up to the lowest of a formula based on service, Rs 20,00,000, or the amount actually received.
Gross Total Income (Section 80B(5))The total income computed under the Act before any Chapter VI-A deduction — arrived at by adding the five heads of income, clubbing any income the law attributes to the assessee, and setting off losses.
Health and Education CessA 4% cess levied on the aggregate of income tax and surcharge payable by a Category III AIF or its investors, raising the effective tax rate on every income head it applies to.
High value ULIPA ULIP issued on or after 1 February 2021 whose aggregate annual premium exceeds Rs 2,50,000, loses the Section 10(10D) exemption and is instead taxed as a capital asset, at 12.5% long-term or 20% short-term.
Hindu Undivided FamilyAn HUF is taxed as its own person under the Income Tax Act — and, under Section 80TTA, one of only two kinds of taxpayer, with an individual, allowed the savings-account interest deduction.
House Rent Allowance exemptionHouse Rent Allowance is exempt up to the least of the HRA actually received, rent paid minus 10% of salary, and 50% of salary in a metro or 40% elsewhere — and is not available under the new tax regime.
Hybrid pass-through entityREITs are taxed as a hybrid pass-through entity — rental, interest and SPV dividend income is exempt at the REIT and taxed only when distributed to unit-holders, but not every category of REIT income gets this treatment.
Inclusive definition of income (Section 2(24))Section 2(24) of the Income Tax Act lists specific sums as "income" but does not close the list — any other receipt of an income-like nature can still be taxed even if it is not named there.
Income from foreign sourcesIncome accruing or arising outside India, other than income from a business controlled in or a profession set up in India, and not deemed to accrue or arise in India.
Income from other sourcesThe head of income under which interest and dividends earned in a PMS are taxed, at the investor's slab rate — with no indexation or capital gains benefit.
Income taxThe tax every individual, HUF and other assessee pays on annual income under the Income Tax Act, 1961, with deductions available under sections such as 80C, 80CCD(1B), 80D, 80G, 80TTA and 24.
Indeterminate TrustA trust whose beneficiaries and their beneficial interests cannot be ascertained from the trust deed. For an AIF, the trustee is taxed on the whole income at the maximum marginal rate under Section 164.
Indexed cost of acquisitionCost of acquisition scaled up by the Cost Inflation Index, so that only the real gain is taxed; withdrawn for transfers on or after 23 July 2024 except for land or building acquired before that date.
Index ETFA mutual fund scheme that invests in securities in the same proportion as an index of securities and lists on an exchange; it is taxed exactly like a listed equity oriented fund.
Indian incomeThe Income-tax Act's shorthand for total income excluding income from foreign sources — the figure tested against Rs 15 lakh in the deemed resident and 120-day residence rules.
Indirect Transfer ProvisionsSection 9 of the Income Tax Act, taxing the transfer of shares or interest in an offshore company or entity that derives its value substantially from assets located in India.
Interest on borrowings to purchase securitiesInterest paid on money borrowed to acquire securities, allowed as a permissible deduction from gross interest on securities when computing income from other sources.
Interest on securities (Section 2(28B))Interest on any security of the Central or a State Government, and interest on debentures or other securities for money issued by a local authority, a company, or a statutory corporation.
Inter-head adjustmentSetting off a loss under one head of income against income under a different head — permitted by section 109 of the Income Tax Act, 2025, but only after intra-head set-off and subject to two bars.
Inter-state delivery problemThe GST trap in exchange delivery — the exchange collects only CGST and SGST, so a buyer tagged to a seller in another state may be unable to claim credit without a registration for that state.
Intra-head adjustmentSetting off a loss from one source against income from another source under the same head of income — the first step of loss relief, under section 108 of the Income Tax Act, 2025.
Investment FundUnder Section 115UB, a Category I or Category II AIF (or an IFSCA-regulated fund) established in India — the only AIFs given tax pass-through. Category III AIFs are outside the definition.
Land appurtenant theretoLand attached to and forming part of a building, whose income is taxable under income from house property only because the building is there — vacant land alone is not.
Limitation of Benefit (LOB) clauseA tax treaty provision denying treaty relief to an entity without genuine economic substance in the treaty country — the workbook notes GAAR is not invoked where an LOB clause already addresses the avoidance.
Long-term capital assetA capital asset held for more than the prescribed period before transfer — generally more than 24 months, and more than 12 months for listed securities and equity oriented fund units.
Long Term Capital GainThe gain on mutual fund units sold after the long-term holding period — 12 months for equity-oriented funds, 24 months for most others — taxed at 12.5% on equity funds above a Rs 1.25 lakh yearly exemption.
Marginal reliefRelief that caps the tax on income just above the section 87A rebate threshold at the amount by which the income exceeds that threshold — so one extra rupee of income never costs more than a rupee of tax.
Marginal Slab RateThe investor's own applicable income-tax slab rate. It taxes IDCW, short-term gains on most non-equity schemes, and all gains on debt-oriented funds and debt ETFs.
Maximum Marginal RateThe highest slab rate of income tax, applied to a Category III AIF's business income at fund level because the fund gets no pass-through — 30% before surcharge and cess.
Mercantile systemThe accounting method under which interest and other income are taxed in the year they accrue, whether or not the money has been received — the alternative the Income-tax Act allows alongside the cash system.
Minimum Alternate TaxA floor tax on a company's book profits under Section 115JB, payable when it exceeds tax computed the normal way — which catches corporate investors receiving Category III AIF distributions.
Multilateral InstrumentAn OECD-framework multilateral treaty that lets countries swiftly modify their bilateral tax treaties to curb treaty shopping and tax avoidance; it supplements, supersedes or modifies how a DTAA applies.
Nil cost ruleThe tax principle that certain rights or shares received without payment are given a cost of acquisition of nil, so the whole sale proceeds, not just a profit margin, become the taxable gain.
Non-relativesSpecific family members the Income Tax Act explicitly excludes from its definition of 'relative' for gift taxation: step-siblings, nephews, nieces and cousins, so gifts from them above Rs 50,000 are taxable.
Non-ResidentAn assessee who fails every residency test in section 6 — taxable in India only on income received, accruing or deemed to accrue in India, and on nothing that arises abroad.
Non-Resident IndianAn Indian citizen or person of Indian origin who does not meet the resident conditions. NRIs may invest in PMS through NRE or NRO accounts and are taxed only on Indian income.
Non-speculative business incomeProfit or loss from derivatives traded on a recognised stock exchange, taxed under "Profits and Gains from Business or Profession" as ordinary business income since the Finance Act, 2005 amendment.
NRE PMS accountThe repatriable route an NRI uses to invest in PMS under the Portfolio Investment Scheme, where funds and gains can be sent back to the NRI's country of residence.
NRO PMS accountThe non-repatriable route an NRI uses to invest in PMS: capital and gains stay in India, subject to Indian taxation, unlike the repatriable NRE PMS account.
Offer for sale in an IPOThe tax rule that gains on unlisted shares sold to the public through an IPO's offer-for-sale route are taxed under Section 112A, as if the shares had always been listed and STT-paid.
Other Mutual FundsThe residual, fourth category in the post-2023 mutual fund tax classification: funds that are neither equity-oriented nor a Specified Mutual Fund, taxed under the ordinary period-of-holding rules.
Parallel calculationFor land or buildings bought before 23 July 2024 but sold after, the requirement to compute tax two ways, 20% with indexation and 12.5% without, and pay whichever is lower.
Partition of an HUFSplitting a Hindu Undivided Family's assets among its members: a tax-neutral event on both sides, no transfer for the HUF, and exempt income for the member who receives the share.
Pass-through statusTax treatment under which a fund's income is not taxed in the fund but directly in its investors' hands — and which the Income Tax Act does not give a Category III AIF.
Permanent establishmentA taxable presence of a non-resident in India. The AIF risk is that an offshore fund's Indian advisory office is treated as one — and treaty-protected business income becomes taxable here.
Personal effectsMovable property held for the personal or household use of the assessee or a dependent family member — excluded from the definition of a capital asset, so its sale generates no capital gains.
PGBPThe Income Tax Act head under which futures and options income earned through a PMS is taxed as business income, not as capital gains, regardless of whether the investor is resident or NRI.
Place of Effective ManagementThe tax-residency test that can treat an offshore fund as an Indian tax resident if its real decision-making is found to happen in India — a risk offshore AIF structures manage through their local advisory offices.
Post-tax returnReturn after taxes on investment income and realised capital gains: pre-tax return × (1 − tax rate). It is what matters to the investor, but performance is communicated pre-tax.
PPF as a tax saving instrumentThe workbook's three-way comparison of PPF against ELSS and NPS Tier 1 as tax-saving options — PPF offers a guaranteed, government-backed return, at the cost of a 15-year lock-in versus ELSS's 3 years.
Pre-construction interestInterest paid on a home loan for the period before the property was acquired or constructed, deductible from house property income in 5 equal instalments starting the year of acquisition or construction.
Premature redemption of SGBThe option to exit a Sovereign Gold Bond after 5 years of its 8-year tenor, on the next interest payment date — with capital gains on the exit exempt for individuals but taxable for other investors.
Presumptive taxationA scheme letting a trader declare profit at a prescribed rate without full books — for PMS clients trading F&O, staying below a 6% profit-to-turnover ratio after opting out can force a tax audit.
Pre-tax equivalentThe taxable return an investment would have to pay to match a tax-free one after tax — a tax-free 8 percent equals a taxable 10 percent for an investor in the 20 percent bracket.
Previous yearUnder the Income Tax Act, 1961, the year in which income is earned. It is taxed in the following assessment year; each runs from 1 April to 31 March.
Principal Purpose TestAn anti-abuse test under the OECD's Multilateral Convention (MLI) that lets tax authorities deny DTAA benefits if obtaining that tax benefit was one of the main purposes of an arrangement.
Prospective applicationSection 50AA's rule that its short-term-gain treatment applies only to Specified Mutual Funds acquired on or after 1 April 2023 — units bought earlier keep the ordinary capital gains rules.
Provisional registrationThe initial, time-limited tax registration an NPO is granted under Section 12AB — valid for a maximum of 3 years, before regular registration for 5 years follows.
Relatives of an HUFUnder the gift-of-securities rules, every member of a Hindu Undivided Family is treated as its "relative" — a far broader definition than the fixed list of relatives that applies to an individual donor.
RelinquishmentThe act of an owner voluntarily withdrawing from and abandoning their rights in a capital asset — undefined in the Income Tax Act, but treated as a "transfer" and so chargeable to capital gains tax.
Renouncement of rightGiving up the right to subscribe to a rights issue or other securities offered by a company — the cost of acquisition of the renounced right is nil, so any amount received for it is fully taxable as capital gains.
Reporting Financial InstitutionAn Indian financial institution — including a Category III AIF — that has agreed to obtain and exchange account information with the US IRS under FATCA, or with other tax authorities under the Common Reporting Standard.
Representative AssesseeThe capacity in which the trustee of an AIF set up as a trust is assessed to income tax under Sections 161 and 164 — paying on behalf of the beneficiaries so the same income is not taxed twice.
Resident and Ordinarily ResidentThe residential status under which an individual's worldwide income is taxable in India — reached by being resident and failing both of the not-ordinarily-resident tests.
Resident but Not Ordinarily ResidentA middle residential status for income tax: the person is a resident of India, yet foreign income unconnected with an Indian business or profession stays outside the Indian tax net.
Residential statusThe classification — resident (ordinarily or not ordinarily), deemed resident or non-resident — that decides which income is taxable in India. Citizenship alone is not the test.
Revocable transferA transfer to a trust whose document lets the transferor get back the income or asset, or reassume power over it; income from it is taxed in the transferor's hands under sections 97 and 98 of the ITA.
Revocable trustA trust the settlor can revoke at his discretion or with the beneficiaries' consent. Income from a revocable transfer is taxed as the transferor's, so an AIF set up this way gets no pass-through.
Salary (Section 17(1))The Income Tax Act's own definition of what counts as salary — wages, pension, gratuity, commission, advance salary, perquisites, leave encashment and more — under Section 17(1).
SEBI turnover chargeA flat Rs 10 per crore of trading turnover, charged by SEBI on both the buy and sell legs of a listed equity transaction, to fund market regulation.
SEBI turnover feeSEBI's own fee on Interest Rate Derivatives trading turnover — currently Rs 5 per crore, plus a flat Rs 50,000 yearly fee for a clearing or self-clearing member for as long as its registration stays in force.
SEBI turnover feesSEBI's fee on the total turnover a broker clocks on the exchange, charged at Rs 15 per Rs 1 crore for most commodities but reduced to Rs 1 per crore for agricultural commodities to support farmer participation.
Section 11The Income Tax Act provision exempting an NPO's property income, conditional on applying at least 85% of it to charitable objects each year, with a 5-year window to accumulate any shortfall.
Section 115BAC regimeThe tax regime that applies by default under Section 115BAC(1A) unless the taxpayer opts out under Section 115BAC(6) — and which caps the surcharge at 25% instead of 37%.
Section 12AAThe pre-2021 income-tax registration route for NPO tax exemption, now superseded by Section 12AB — still relevant because every 12AA-registered charity had to re-register under 12AB.
Section 12ABThe current Income Tax Act registration route every NPO must hold to claim exemptions — granted first as a maximum 3-year provisional registration, then as a 5-year regular registration, replacing Section 12AA from 2021.
Section 24The Income Tax Act deduction for interest paid on a housing loan taken to buy, build or repair a property, for loans taken after 1 April 1999.
Section 44ADThe presumptive taxation scheme under which F&O income can be assessed at 6% of turnover without allowing expense deductions, available only if total turnover does not exceed Rs 2 crore.
Section 80CThe income-tax deduction for money put into life insurance, provident fund, ELSS, five-year bank deposits, NPS Tier 1, NSC and home-loan principal, capped in aggregate at Rs 1,50,000 a year.
Section 80DThe income-tax deduction for medical insurance premiums paid for yourself, your spouse, your dependent children and your dependent parents — the workbook does not state a rupee ceiling.
Section 80GThe Income Tax Act provision letting any taxpayer deduct donations to specified funds and registered charitable institutions — at 100% or 50%, some capped at 10% of adjusted gross total income.
Section 80M deductionA deduction that stops the same dividend being taxed twice in a corporate chain: an Indian company that receives dividend from another Indian company and passes it on in time can deduct what it received.
Section 80TTAThe deduction against tax on savings bank interest, available only to an individual or HUF, and only for a savings account with a bank, post office or cooperative bank — not for fixed deposit interest.
Section 87A rebateA tax rebate for resident individuals with total income below a threshold — up to Rs 12,500 (old regime, Rs 5 lakh), and under the new regime up to Rs 25,000 (Rs 7 lakh) or Rs 60,000 (Rs 12 lakh from FY 2025-26).
Securities Transaction TaxA central government tax collected by the exchange on the sell side of every futures and option trade — 0.05% of futures traded value, 0.15% of option premium, and 0.15% of settlement price on exercise.
Segregated portfolio cost formulaThe rule for splitting a mutual fund unit's original cost of acquisition between the main scheme and a segregated portfolio, in the same proportion as the fall in each portfolio's net asset value.
Self-occupied propertyA house property whose annual value is taken as nil for tax purposes — and, since the Finance Act 2025, any of an owner's houses that is actually occupied, or simply not let out, up to a limit of two.
Set-off of lossesUsing a business loss against other eligible income in the same financial year, before any unabsorbed balance is carried forward: for PMS F&O losses, against business or non-salaried income only, never salary.
Share warrantAn option issued by a company to subscribe to its equity shares at a pre-determined price — and, in tax terms, a capital asset whose conversion, transfer or forfeiture each has its own treatment.
Short-term capital assetA capital asset taxed as short-term: listed securities held 12 months or less, unlisted securities 24 months or less, plus MLDs, specified mutual funds and unlisted bonds deemed short-term whatever the holding.
Short Term Capital GainThe gain on mutual fund units sold within the holding period — 12 months or less for equity-oriented funds, 24 months or less for most others — taxed at 20% for equity funds and at slab rate otherwise.
Source based taxationIndia taxes capital gains where the income arises — inside India — rather than by the investor's residence, which is why offshore AIF structures exist to avoid the same gain being taxed twice.
Specified accountA retirement account held in a notified country - the USA, Canada or the UK - whose income Section 89A lets an Indian resident be taxed on at withdrawal rather than as it accrues.
Specified Mutual FundA mutual fund caught by section 50AA — gains on it are short-term no matter how long it was held, and are taxed at the investor's slab rate.
Specified personsThe four categories of people — an NPO's founder, a substantial contributor, a trustee or manager, or a trustee's relative — whose benefit from NPO income or property costs the NPO its tax exemption.
Speculative transactionUnder income tax, a transaction settled otherwise than by actual delivery. Exchange-traded currency derivatives are excluded by Section 43(5), so their gains and losses are non-speculative business income.
Stamp dutyA levy on mutual fund units from 1 July 2020: 0.005% of the amount invested on every issue of units — lump sum, SIP, STP, switch-in, IDCW reinvestment — and 0.015% on transfers.
Standard deductionA flat deduction allowed without proof of expenses — Rs 50,000 (old regime) or Rs 75,000 (new regime) from salary, and 30% of net annual value from let-out house property.
Stock-in-tradeSecurities or goods held for the purpose of business — excluded from the definition of capital asset, so profit on their sale is business income, not capital gains.
Substantial contributorAnyone who has given ₹50,000 or more to an NPO by the end of the financial year — one of four specified-person categories whose benefit from NPO funds costs the NPO its tax exemption.
Taxation of winding-up proceedsMoney a unit-holder receives when a mutual fund scheme is wound up is treated like a normal redemption amount - so the ordinary capital gains rules for that scheme apply to it.
Taxation reportThe periodic statement a portfolio manager must give every PMS client under Regulation 30, covering capital gains, derivatives income, dividends, interest and fees so the client can work out tax due.
Tax NeutralityThe principle that pooling investor money through an AIF structure should not leave an investor worse off, tax-wise, than if they had invested directly — a key test when choosing where to domicile a fund.
Tax Residency CertificateThe certificate a non-resident investor obtains from its home tax authority to claim benefits under a Double Taxation Avoidance Agreement — without it, Indian domestic rates apply.
Tax treaty shoppingArrangements aimed at obtaining the reliefs of a double taxation avoidance agreement for the indirect benefit of residents of some other country — which India's treaties must not create opportunities for.
Tax yearUnder the Income Tax Act, 2025, the 12-month financial year beginning 1 April — or, for a newly set-up business or profession, the period from set-up to the end of that financial year.
TDS on dividendTax deducted at source on mutual fund dividend (IDCW) payouts — 10% for residents, exempt below Rs 5,000 a year, 20% for non-residents, and 20% wherever PAN is missing.
TDS on IDCWTax deducted at source at 10 percent on an IDCW from a mutual fund scheme above Rs 5,000 — applicable even to resident investors, unlike redemption proceeds, which carry no TDS for residents.
TDS — Tax Deducted at SourceTax the bank deducts before crediting certain interest to you — absent on savings bank interest but charged on fixed and recurring deposit interest beyond a stipulated amount the workbook does not state.
Telegraphic Transfer buying rateThe State Bank of India's telegraphic transfer buying rate for a foreign currency — the rate the Income Tax rules use to convert foreign-currency capital gains and income from securities into rupees.
Trading turnoverThe ICAI-method turnover figure for Exchange Traded Interest Rate Derivatives — favourable and unfavourable differences plus option premium received — that fixes whether a Section 44AB tax audit applies.
Twenty per cent dividend deduction capA resident may set only interest expenditure against dividend income, and only up to 20% of the total dividend for the year; no other expense is allowed, and a non-resident gets no deduction at all.
Unabsorbed depreciationDepreciation that could not be set off in the year it arose — treated as a separate item from business loss, carried forward for any number of years, and set off against any income except salary.
Uniform stamp duty regimeSince 1 July 2020, exchanges — not brokers — collect stamp duty on commodity derivatives trades and remit it to the buyer's state, at a uniform rate of about Rs 2 per Rs 1 lakh.
Unlisted equity sharesShares not listed on any recognised stock exchange in India: the long-term holding period is 24 months rather than 12, long-term gains are taxed at 12.50%, and short-term gains at normal rates.
Withholding taxTax deducted from income at the point it is paid or credited — for an AIF, 10% on income distributed to a resident investor and 20% where a non-resident is paid dividend.