Tax & Finance Glossary
Essential terminology, legal definitions, and explanations u/s CGST Rules and Income Tax Acts.
What is Advance Ruling?
An advance ruling is a written decision from the Authority for Advance Ruling (AAR) on a GST question, binding on the applicant and the jurisdictional officer.
What is Advance Tax?
Advance tax is income tax paid in instalments during the financial year on estimated income, rather than in a lump sum at the end.
What is Annual Information Statement (AIS)?
The Annual Information Statement (AIS) is a comprehensive statement of a taxpayer's financial transactions reported to the income-tax department.
What is Arm's Length Price?
The arm's length price (ALP) is the price that would be charged in a comparable transaction between unrelated parties under similar conditions.
What is Associated Enterprise?
An associated enterprise is an enterprise that participates, directly or indirectly, in the management, control or capital of another, bringing their transactions within transfer-pricing rules.
What is BEPS?
BEPS (Base Erosion and Profit Shifting) is the OECD/G20 project addressing tax-avoidance strategies that shift profits to low- or no-tax locations.
What is Block of Assets?
A block of assets is a group of assets of the same class and depreciation rate, on which income-tax depreciation is computed collectively using the written-down value (WDV) method.
What is Blocked Credit (Section 17(5))?
Blocked credit refers to input tax credit that Section 17(5) of the CGST Act specifically disallows, even when the purchase is used for business.
What is Capital Gains?
Capital gains are the profits arising from the transfer of a capital asset, taxed as short-term or long-term depending on the holding period.
What is Composition Scheme?
The composition scheme is a simplified GST option for small taxpayers to pay tax at a flat rate on turnover, without claiming input tax credit.
What is DRC-01 Notice?
A DRC-01 is the formal show-cause notice issued under GST for a demand of tax not paid, short paid or wrongly availed, under Section 73 or 74.
What is DTAA?
A Double Taxation Avoidance Agreement (DTAA) is a treaty between two countries that allocates taxing rights and provides relief from being taxed twice on the same income.
What is E-Invoice?
An e-invoice under GST is a B2B invoice reported to the Invoice Registration Portal (IRP), which validates it and returns a unique Invoice Reference Number (IRN) and QR code.
What is ECB (External Commercial Borrowing)?
External Commercial Borrowing (ECB) is borrowing by an Indian entity from a recognised foreign lender, regulated by the RBI under FEMA.
What is Equalisation Levy?
Equalisation levy is a tax on certain digital transactions with non-residents - 6% on online advertising and a 2% levy on e-commerce supply (the latter withdrawn from August 2024).
What is Faceless Assessment?
Faceless assessment is an electronic income-tax assessment under Section 144B conducted through the National Faceless Assessment Centre, without any physical interface.
What is FDI (Foreign Direct Investment)?
Foreign Direct Investment (FDI) is investment by a non-resident into an Indian company's equity, under the FDI policy and FEMA regulations.
What is FEMA?
FEMA, the Foreign Exchange Management Act 1999, is the law governing foreign exchange transactions, cross-border investment and remittances in India.
What is Form 15CA / 15CB?
Forms 15CA and 15CB are the declaration and accountant's certificate required for most taxable foreign remittances to non-residents.
What is Form 26AS?
Form 26AS is a consolidated tax-credit statement showing the TDS, TCS, advance tax and self-assessment tax credited against a taxpayer's PAN.
What is Form 3CD?
Form 3CD is the detailed statement of particulars that accompanies the tax-audit report under Section 44AB.
What is Form 3CEB?
Form 3CEB is the accountant's report under Section 92E certifying the particulars of international and specified domestic transactions with associated enterprises.
What is GSTR-2B?
GSTR-2B is a static, auto-drafted statement that shows the input tax credit available to a recipient for a tax period.
What is GSTR-9?
GSTR-9 is the annual GST return that consolidates a financial year's outward and inward supplies, ITC and tax into one return per GSTIN.
What is GSTR-9C?
GSTR-9C is a self-certified reconciliation statement that links the GST annual return (GSTR-9) with the audited annual financial statements.
What is HSN Code?
An HSN (Harmonized System of Nomenclature) code is an internationally standardised number that classifies goods for GST rate and reporting purposes.
What is Invoice Management System (IMS)?
The Invoice Management System (IMS) is a GST portal facility that lets a recipient accept, reject or keep pending each supplier invoice before it flows into GSTR-2B.
What is Indexation?
Indexation is the adjustment of an asset's cost of acquisition for inflation using the Cost Inflation Index (CII), to compute long-term capital gains.
What is Input Tax Credit (ITC)?
Input Tax Credit (ITC) is the credit a registered person can claim for the GST paid on business purchases, set off against the GST payable on sales.
What is Lower Deduction Certificate?
A lower deduction certificate is an order under Section 197 authorising TDS at a lower or nil rate where normal TDS would exceed the payee's likely tax liability.
What is ODI (Overseas Direct Investment)?
Overseas Direct Investment (ODI) is investment by an Indian entity in the equity or control of a foreign entity, governed by the FEMA Overseas Investment Rules 2022.
What is Permanent Establishment?
A permanent establishment (PE) is a fixed place of business through which a foreign enterprise carries on business in another country, creating a taxable presence there.
What is Pillar Two?
Pillar Two is the BEPS measure introducing a 15% global minimum tax on large multinational groups through the GloBE rules.
What is Place of Supply?
Place of supply is the location that determines whether a GST transaction is intra-State (CGST + SGST) or inter-State (IGST).
What is Presumptive Taxation?
Presumptive taxation lets eligible small businesses and professionals declare income at a fixed percentage of turnover without maintaining detailed books.
What is QRMP Scheme?
QRMP (Quarterly Return Monthly Payment) lets taxpayers with turnover up to Rs.5 crore file GSTR-1 and GSTR-3B quarterly while paying tax monthly.
What is Reverse Charge Mechanism (RCM)?
Reverse Charge Mechanism (RCM) is the GST provision under which the recipient, not the supplier, is liable to pay the tax.
What is SAC Code?
A SAC (Services Accounting Code) is the classification code used to identify services for GST rate and reporting purposes.
What is Scrutiny Assessment?
A scrutiny assessment is a detailed examination of a taxpayer's return under Section 143(3), initiated by a notice under Section 143(2).
What is Section 80C?
Section 80C is a deduction of up to Rs.1.5 lakh a year for specified investments and payments, available only under the old tax regime.
What is Self Assessment Tax?
Self-assessment tax is the balance tax a taxpayer pays on their own, after TDS and advance tax, before filing the income-tax return.
What is Set Off of Losses?
Set-off of losses is the adjustment of a loss under one head of income against income, first within the same head and then across heads, with the balance carried forward.
What is Show Cause Notice?
A show-cause notice (SCN) is a formal notice asking a taxpayer to explain why a proposed tax demand, penalty or action should not be taken.
What is Tax Audit?
A tax audit is an audit of accounts required under Section 44AB when turnover or gross receipts exceed prescribed limits.
What is TCS?
Tax Collected at Source (TCS) is tax collected by a seller from the buyer on specified sales and remittances, under Section 206C.
What is TDS?
Tax Deducted at Source (TDS) is income tax withheld by the payer at the time of making specified payments, and deposited with the government on the payee's behalf.
What is Taxpayer Information Summary (TIS)?
The Taxpayer Information Summary (TIS) is a simplified, category-wise summary derived from the AIS, often used to pre-fill the income-tax return.
What is Transfer Pricing?
Transfer pricing is the set of rules requiring that transactions between associated enterprises be priced at arm's length, as if between unrelated parties.
What is Withholding Tax?
Withholding tax is tax deducted at source on payments, particularly cross-border payments to non-residents under Section 195.
What is Zero Rated Supply?
A zero-rated supply is an export or supply to an SEZ on which GST is effectively nil and the related input tax credit is refundable.