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Tax Audit Glossary
  • Assessment Year :

    ​Assessment Year means the period of twelve months commencing on the 1st day of April every year.​

  • Books of Accounts :

    "Books or books of account" includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or in electronic form or in digital form or as print-outs of data stored in such electronic form or in digital form or in a floppy, disc, tape or any other form of electro-magnetic data storage device.

    The following books of accounts are required to be maintained by a person engaged in a business or profession:

    For specified professions other than company secretary and information technology (where gross receipts exceed Rs. 1,50,000 in any of the 3 years immediately preceding the previous year) -

     a)  Cash book

     b)  Journal, if books of accounts are maintained according to the mercantile system of accounting

     c)  Ledgers

     d)  Carbon copies of bills and carbon copies or counterfoil of receipts issued by the assessee of value exceeding Rs. 25 (must be machine numbered or serially numbered)

     e)  Original bills issued to the assessee and receipts in respect of the expenditures incurred by him.

     f)  Signed vouchers, if bills and receipts are not issued and the amount of expenditure does not exceed Rs. 50 if the cash book does not contain adequate particulars in respect of these expenditures.

    However, for medical professions, the following additional books are required to be maintained:

     a)  Daily case register in Form 3C

     b)  Inventory under broad heads of stock of drugs, medicines, and other consumable accessories used for the purpose of profession, as on the first and last day of the previous year.

    For specified professions (in every case), and non-specified professions & businesses where income or gross turnover exceeds the limit - such books of account which may enable the Assessing Officer to compute the taxable income.

  • Capital Asset: :

    The term 'capital asset' means:

    a)  Property of any kind, held by an assessee, whether or not connected with his business or profession;

    b)  Any securities held by a FII which has invested in such securities in accordance with the SEBI Regulations;

    Any unit linked insurance policy to which exemption under Section 10(10D) does not apply on account of applicability of the fourth and fifth proviso [High premium equity oriented ULIPs]

  • Contingent Liability: :

    ​A contingent liability is a potential liability that may or may not occur, depending on the result of uncertain future events.​

  • Cost of Acquisition: :

    ​The cost of acquisition in respect to a capital asset refers to the cost incurred in acquiring such capital asset. It includes the purchase consideration and any expenditure incurred exclusively for acquiring the capital asset.​

  • Deemed Dividend: :

    A deemed dividend is a type of dividend that is not actually paid to the shareholders but is deemed or considered as a dividend. It includes the following:

    a) Distribution entailing release of company's assets

    b) Distribution of debentures, or deposit certificates

    c) Distribution of bonus shares to preference shareholders;

    d) Distribution on liquidation

    e) Distribution by company on reduction of its capital; and

    f) Loan or advance to shareholders.

  • Dividend :

    ​Dividend is an appropriation of net profit that an entity pays out to its shareholders. Dividend received is treated as income by the receiver.​

  • Impermissible Avoidance Arrangement: :

    An impermissible avoidance arrangement means an arrangement, the main purpose of which is to obtain a tax benefit, and it—

    a) creates rights, or obligations, which are not ordinarily created between persons dealing at arm's length;

    b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Act;

    c) lacks commercial substance or is deemed to lack commercial substance under section 97, in whole or in part; or

    d) is entered into, or carried out, by means, or in a manner, which are not ordinarily employed for bona fide purposes

  • Income Computation and Disclosure Standards (ICDS): :

    ​​​ICDS stands for Income Computation and Disclosure Standards. It is issued by the Central Government in the exercise of the powers conferred by Section 145(2) of the Income-tax Act, 1961 to bring uniformity in the accounting policies and provisions of the Income-tax Act and to reduce litigations.

  • Interest: :

    ​The term interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised.​

  • Permanent Account Number (PAN) :

    ​The Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued for the purpose of identification of a taxpayer. PAN has to be mentioned in all communications with the Income-tax Dept. and in specified financial transactions which exceed the threshold limit.​

  • Previous Year :

    ​Previous Year means the financial year immediately preceding the assessment year.

    In the case of a business or profession newly set up or a source of income newly coming into existence in a financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or the date on which the source of income newly comes into existence and ending with the said financial year.​

  • Receipts: :

    ​Receipts can be classified into two kinds: A) Revenue receipt, B) Capital receipt. Revenue receipts are recurring in nature which includes sales revenue, interest income, rent received, etc. Capital receipts are not earned from regular business operations but result from the disposal of long-term assets. It includes sale of land, buildings, machinery, and investments, etc.​

  • Speculative Transaction: :

    ​Speculative transaction means a transaction in which a contract for the purchase or sale of any commodity including stock and shares is periodically or ultimately settled otherwise than through actual delivery or transfer of the commodity or scrips.​

  • Stamp Duty Value :

    ​"Stamp duty value" means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.​

  • Statement of Financial Transaction :

    ​Statement of Financial Transaction (SFT) is a reporting mechanism wherein specified entities are required to provide information about material financial transactions entered into by certain person to the Income-tax Dept.​​

  • TDS Return :

    ​A TDS statement (TDS return) is statement of TDS filed by a person responsible for deduction of tax source. It contains particulars related to all deduction of tax made by person during a quarter.​

  • Tax Collected at Source :

    ​Tax Collected at Source is the amount of tax collected by specified person in specified transactions from the buyer or licensee or lessee, etc.​

  • Tax Deducted at Source :

    ​The concept of "Tax Deducted at Source", commonly known as TDS ensures regular flow of revenue to the Government. The payer of income is required to deduct tax from certain payments at the prescribed rates and deposit it to the credit of the Central Government within the prescribed time.​

  • Tax Deduction and Collection Number (TAN) :

    ​Tax Deduction & Collection Account Number (TAN) is a 10 digit alpha numeric number to be obtained by all persons who are responsible for deducting or collecting tax.​

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