Income Tax Glossary India: 50+ Terms Explained A to Z (2026)

Tax paperwork runs on labels — assessment year, TDS, 87A, Form 26AS (Form 168 from tax year 2026-27) — and each label hides a rule that affects your money. This A-to-Z glossary defines the terms Indian taxpayers actually meet in 2026, in plain English, with the current position (FY 2025-26 / AY 2026-27 and the Income-tax Act, 2025) built into each entry. Keep it open beside your ITR or any notice and most jargon resolves on the spot.

New law note: From 1 April 2026, the Income-tax Act, 2025 replaces the Income-tax Act, 1961. Returns for FY 2025-26 (AY 2026-27) are still filed under the 1961 Act with ITR-1 to ITR-7, so the section numbers used in this guide remain the ones for that filing. From tax year 2026-27, provisions carry new numbers (for example, Section 80C becomes Section 123 and Section 87A becomes Section 156) and key forms change (Form 16 becomes Form 130 and Form 26AS becomes Form 168), while proceedings for earlier years continue under the 1961 Act. See the complete mapping in our Income-tax Act 2025 section and form mapping guide.

A

Advance Tax

Tax paid in instalments during the year as you earn, instead of in one lump sum after the year closes. For FY 2026-27 the instalments fall on 15 June, 15 September, 15 December and 15 March, and they apply once tax payable after TDS crosses ₹10,000.

AIS (Annual Information Statement)

A consolidated statement the tax department compiles from reports filed by banks, mutual funds, brokers and registrars, listing your interest, dividends, share sales and other high-value transactions against your PAN. Review it before filing, because the department compares your ITR with this data.

Assessment Year (AY)

The twelve months from 1 April to 31 March in which income earned during the previous year is assessed and taxed. Income of FY 2025-26 is assessed in AY 2026-27, which is the label printed on your ITR and notices.

Assessee

Any person — individual, HUF, firm, company, trust or association — who is liable to pay tax or against whom proceedings can be taken under the law. The word is wide enough to cover someone acting for another person, such as a guardian for a minor.

B

Basic Exemption Limit

The level of total income up to which no tax is charged. For FY 2025-26 it is ₹2.5 lakh for those below 60 under the old regime, while the new regime opens with a nil-tax slab up to ₹4 lakh.

Belated Return

A return filed after the original due date but before 31 December of the assessment year, carrying a late fee under Section 234F (late-fee provision renumbered under the Income-tax Act, 2025). For AY 2026-27 the belated window runs until 31 December 2026, though most losses cannot be carried forward from a belated return.

C

Capital Gains (STCG / LTCG)

Profit on selling a capital asset such as shares, property or gold, classified as short-term or long-term by your holding period. For FY 2025-26, long-term gains on listed equity and equity funds are taxed at 12.5% above ₹1.25 lakh a year, while short-term gains on them are taxed at 20%.

Cess

A levy collected on top of your tax for a stated purpose. The Health and Education Cess of 4% applies on tax plus surcharge for every taxpayer.

Clubbing of Income

Rules that add another person’s income to yours — typically a spouse’s or minor child’s income arising from assets you transferred to them without adequate consideration. A minor’s income is generally clubbed with a parent’s, with a small exemption for the child’s own earnings.

Condonation

An official relaxation that lets you file or claim beyond the normal time limit when reasonable cause exists — for example, a refund claim for an old year. You apply online on the e-filing portal, and the department weighs the reasons and the amount involved.

D

Deduction vs Exemption

An exemption removes a specific kind of income from tax altogether, while a deduction reduces taxable income by what you invested or spent. Exemptions such as HRA belong mainly to the old regime, and most big deductions do too, since the new regime allows only a short list.

Dividend

Income from shares, taxed at your slab rates in your hands since April 2020. Companies and mutual funds deduct 10% TDS once annual dividend from them crosses ₹5,000.

E

e-PAN

A digitally issued PAN carrying the same legal weight as the physical card. Aadhaar holders can obtain a free instant e-PAN through the income tax e-filing portal in minutes.

e-Verification

The step that confirms your ITR — by Aadhaar OTP, EVC, net banking or by posting the signed ITR-V to CPC Bengaluru. An unverified return is treated as invalid, and you must verify within 30 days of filing.

F

Form 15G (15G/15H are merged as Form 121 from tax year 2026-27) / 15H

Self-declarations given to banks and other payers so they do not deduct TDS when your estimated total tax for the year is nil. Form 15G suits resident individuals below 60 and HUFs; Form 15H (15G/15H are merged as Form 121 from tax year 2026-27) is for senior citizens and is more lenient. Validity is one financial year.

Form 16 (Form 130 from tax year 2026-27)

The annual TDS certificate for salary, issued by your employer by 15 June after the financial year ends. Part A is the government-verified certificate and Part B is the salary-and-deduction annexure you need while filing.

Form 26AS

Your consolidated annual tax statement on the TRACES portal — TDS deducted, TCS collected, advance tax paid and refunds issued against your PAN. Reconcile it with Form 16 and your AIS before you file.

G

Gross Total Income (GTI)

Your income from all five heads — salary, house property, business or profession, capital gains and other sources — added up before Chapter VI-A deductions or set-offs. Deductions convert this figure into total income.

H

HUF (Hindu Undivided Family)

A separate taxable person recognised for a Hindu family, with its own PAN, its own slab rates and its own basic exemption. Income belongs to the family unit rather than to members, and a full partition is how it ends.

Holding Period

How long you keep an asset before selling, which decides whether the gain is short-term or long-term. Listed equity and equity mutual funds turn long-term after 12 months; immovable property and unlisted shares after 24 months.

I

ITR-U (Updated Return)

A return you file to report income missed in the original, belated or revised return, available within 48 months of the end of the relevant assessment year for eligible years. Additional tax applies on top of the extra liability, rising the later you file.

Indexation

Adjusting an asset’s purchase cost for inflation using the notified Cost Inflation Index, which shrinks the taxable long-term gain. After the 2024 amendments it survives only in limited cases — mainly a grandfathering choice for certain land and building sales — so confirm it applies to your asset.

M

Marginal Relief

A softener that stops tax from jumping sharply when income crosses a threshold, such as a surcharge slab or the Section 87A (Section 156 of the Income-tax Act, 2025) rebate boundary. It caps the extra tax so that exceeding the line by a rupee cannot cost you thousands.

MAT (Minimum Alternate Tax)

A floor tax on companies whose book profits are healthy but taxable income is low — 15% of book profit plus surcharge and cess. MAT credit can be carried forward and set off against regular tax for up to fifteen years.

N

New Regime

The default tax regime with lower slab rates but hardly any deductions — no HRA or 80C, though salaried taxpayers still get a standard deduction. For FY 2025-26 the slabs begin with nil tax up to ₹4 lakh, and the 87A rebate keeps income up to ₹12 lakh tax-free.

Notice u/s 143(1) and 148

An intimation under Section 143(1) (Section 270 of the Income-tax Act, 2025) is the automated result of comparing your return with the department’s data, flagging arithmetical adjustments or TDS mismatches. A Section 148 notice is more serious — it alleges income has escaped assessment and requires you to file a return in response.

O

Old Regime

The original regime with higher slabs — starting at ₹2.5 lakh — but full access to deductions such as 80C, 80D and HRA. Salaried taxpayers pick it inside the ITR; anyone with business or professional income must opt out of the new regime through Form 10-IEA.

Outstanding Demand

Tax, interest or penalty shown as unpaid against your PAN on the e-filing portal, arising from processing adjustments, orders or mismatches. Respond online — agree and pay, or disagree with reasons — within the time given, or recovery action can follow.

P

PAN (Permanent Account Number)

The ten-character alphanumeric identity that anchors every tax transaction in India — returns, TDS, bank accounts and high-value purchases. It follows the format AAAA A9999 A, and the fourth character reveals the holder type.

Presumptive Taxation

Sections 44AD, 44ADA and 44AE let small businesses and professionals declare a prescribed share of turnover as income without full books — 8% of cash receipts (6% for digital) for eligible businesses, and half of gross receipts for specified professionals up to ₹75 lakh.

Previous Year

Under the 1961 Act, the financial year in which income is earned and on which the following year’s assessment is based. The Income-tax Act, 2025 replaces the previous year and assessment year pair with a single Tax Year from 1 April 2026.

R

Rebate u/s 87A

A rebate that reduces the tax of resident individuals with modest incomes to nil — up to ₹60,000 under the new regime for FY 2025-26, covering income up to ₹12 lakh, and ₹12,500 in the old regime up to ₹5 lakh. It does not apply to special-rate income such as capital gains.

Rectification u/s 154

An online request to correct apparent mistakes in an intimation or order — wrong TDS credit, an arithmetical slip or a misspelled name. File it from the e-filing portal against the specific intimation or demand, and the department can amend its record.

Refund

The amount the department returns when taxes already paid — TDS, advance tax, self-assessment — exceed your final liability. Interest under Section 244A (renumbered under the Income-tax Act, 2025) accrues when the refund arises from a return filed on or before the due date.

S

Scrutiny

A detailed examination of your return under the faceless assessment scheme, started by a Section 143(2) notice, in which you must support claims with evidence through the portal. Selection is data-driven, so mismatches with AIS and unusual claims raise the odds.

Self-Assessment Tax

The tax you pay yourself, after adjusting TDS and advance tax against total liability, before submitting the ITR. It is deposited through challan ITNS-280 and then shown in the return as a prepaid tax.

Set-off and Carry Forward

Adjusting losses of one head against another head’s income in the same year, then carrying the balance to future years within time limits. Most business and capital losses can be carried for eight years, while unabsorbed depreciation has no time limit.

Slab Rate

The progressive structure under which different slices of income are taxed at different rates as income rises. Both regimes use slabs — the new regime for FY 2025-26 starts at 5% above ₹4 lakh and reaches 30% beyond ₹24 lakh.

Standard Deduction

A flat deduction from salary and pension available in both regimes — ₹75,000 under the new regime and ₹50,000 under the old regime for FY 2025-26. It needs no investment or proof.

Surcharge

An extra charge on the tax itself for higher incomes — 10% above ₹50 lakh, 15% above ₹1 crore and 25% above ₹2 crore — with marginal relief smoothing the jumps. The old regime can reach 37% above ₹5 crore, a level removed in the new regime.

Section 80C (Section 123 of the Income-tax Act, 2025)

The best-known old-regime deduction, up to ₹1.5 lakh a year for eligible investments and spending — PPF, ELSS, life insurance, school tuition fees and home-loan principal. It is not available in the new regime.

Section 80D (Section 126 of the Income-tax Act, 2025)

Deduction for health insurance premium — up to ₹25,000 for cover for yourself and family, ₹50,000 where a senior citizen is covered, with the same limits again for separate parents’ cover. Preventive health check-up costs count within these limits. Map the year’s 80C and 80D room with a Section 80C deduction planner before you invest.

Section 89 Relief (Form 10E — Form 123 from tax year 2026-27)

Relief that spreads salary arrears across the years they relate to, so a lump sum is not taxed at today’s higher slab alone. You compute the benefit in Annexure-I of Form 10E and file it online before submitting your ITR.

T

TAN (Tax Deduction Account Number)

The ten-character number every deductor — employer, bank or company — must hold to deduct, deposit and report TDS. Individual property buyers using Form 26QB (Form 141 from tax year 2026-27) are an exception and do not need a TAN.

Tax Audit

A chartered accountant’s audit of books required once turnover or receipts cross limits — ₹10 crore for businesses where 95% of transactions are digital (₹1 crore otherwise) and ₹75 lakh for specified professionals with 95% digital receipts. The report is due by 30 September of the assessment year.

Tax Credit

Any amount you can set against your final tax bill — TDS deducted from your income, TCS, MAT credit or foreign tax credit. Credits appear in Form 26AS and reduce what you pay at filing.

Tax Year (ITA 2025)

Under the Income-tax Act, 2025, effective 1 April 2026, a single Tax Year running from 1 April to 31 March replaces the previous year and assessment year. Income of tax year 2026-27 is filed, assessed and processed under that one label from AY 2027-28 onwards.

TCS (Tax Collected at Source)

Tax a seller or specified collector adds to your payment on notified transactions — overseas remittances under LRS, sale of scrap, motor vehicles above the threshold — and deposits against your PAN. It is not an extra cost: it shows up in Form 26AS and adjusts against your final liability.

TDS (Tax Deducted at Source)

Tax the payer withholds from payments such as salary, interest, rent or professional fees and deposits with the government against your PAN. It is prepaid tax visible in Form 26AS, and under the 2025 Act the TDS provisions are renumbered into the 390s series from 1 April 2026.

TIS (Taxpayer Information Summary)

The derived summary in your e-filing account that converts AIS data into category-wise figures the department expects you to report. You can submit feedback on mismatches in TIS before filing, which helps prevent a Section 143(1) adjustment.

Total Income

Gross total income minus Chapter VI-A deductions and permissible set-offs — the final taxable figure on which slab rates, surcharge and cess apply. It is rounded to the nearest rupee.

V

VDA (Virtual Digital Asset)

The law’s umbrella term for crypto-assets, NFTs and similar digital property. Gains are taxed at a flat 30% plus cess with no expense deduction, other losses cannot be set off, and 1% TDS applies to transfers.

W

Wage Month

The month to which salary or wages relate, as distinct from the month of payment. Payroll TDS and statutory contributions such as EPF and ESI follow the wage month, so March wages paid in April still belong to March for compliance purposes.

Key takeaways

• Fifty-plus terms — from assessment year to wage month — are defined here with FY 2025-26 and AY 2026-27 numbers on one page.
• AY 2026-27 remains under the 1961 Act; the single Tax Year of the Income-tax Act, 2025 starts with tax year 2026-27.
• Most notices begin as mismatches, so reconcile Form 26AS, AIS and TIS before filing.
• The new regime is the default for FY 2025-26; old-regime choices such as 80C, 80D and HRA need conscious selection, and Form 10-IEA where business income exists.

Frequently asked questions

Is previous year the same as assessment year?

No. The previous year is when you earn the income (FY 2025-26), and the assessment year is when it is taxed (AY 2026-27). From 1 April 2026, the Income-tax Act, 2025 merges both into a single Tax Year.

Is AIS the same as Form 26AS?

No. Form 26AS shows tax paid against your PAN — TDS, TCS and advance tax — while AIS is the department’s statement of your transactions and income. Use both, plus TIS, before filing.

Which regime should salaried taxpayers pick for FY 2025-26?

Up to about ₹12.75 lakh the new regime usually wins, thanks to the ₹12 lakh rebate and the ₹75,000 standard deduction; beyond that, compare both years with an income tax calculator and the old vs new regime comparison. Your deduction portfolio decides the answer at higher incomes.

What if I missed even the 31 December belated deadline?

For eligible years you can file ITR-U within the extended window with additional tax, but carry-forward of most losses is gone. Confirm the current limit for your assessment year before relying on it.

Do the old section numbers still work?

For AY 2026-27 and earlier, yes — the 1961 Act governs. From tax year 2026-27 the new Act’s numbering applies, with TDS provisions in the 390s series, so always cross-check a notice before replying.

Disclaimer: Tax laws change frequently. Verify current rates and deadlines on the official portals (incometax.gov.in, gst.gov.in) or consult a qualified professional before acting.