Comprehensive Guide to Taxation, Finance & Business Terms in India
Published on July 7, 2025
Nidhi Gupta
Senior Tax Consultant & Financial Strategist
Your complete A-Z reference for essential tax, finance, and business terminology in India, featuring clear definitions, practical examples, and expert insights.
Understanding financial and tax terminology is crucial for making informed decisions in India's complex regulatory environment. This comprehensive glossary serves as your ultimate reference, whether you're a business owner, investor, or individual taxpayer.
📊 Basic Tax Terms
- Assessment Year (AY): The year following the Financial Year when income is assessed and taxed. Example: Income earned in FY 2024-25 is taxed in AY 2025-26.
- Financial Year (FY): A 12-month period from April 1 to March 31 used for accounting and tax reporting. Example: FY 2024-25 runs from April 1, 2024 to March 31, 2025.
- Taxable Income: The portion of income subject to taxation after deductions. Example: Gross salary minus 80C deductions.
- Tax Deduction at Source (TDS): Tax collected at the income source. Various sections like 192 (Salaries), 194 (Dividends).
- Tax Collected at Source (TCS): Tax collected by sellers on specified goods/services. Example: 0.1% TCS on sale of motor vehicles over ₹10 lakhs.
- Advance Tax: Tax paid in installments when total tax exceeds ₹10,000. Due on 15th June, 15th Sept, 15th Dec, and 15th March.
- Self-Assessment Tax: Additional tax paid before filing ITR if advance tax was insufficient. Paid before July 31 for most individuals.
🏢 Business & Company Registration
- Private Limited Company: A business structure with limited liability and separate legal identity. Requires minimum 2 directors and 2 shareholders.
- LLP (Limited Liability Partnership): Hybrid structure combining partnership benefits with limited liability. Ideal for professional services firms.
- One Person Company (OPC): Single-promoter company with limited liability. Perfect for solo entrepreneurs.
- MSME Registration: Government registration for Micro, Small and Medium Enterprises. Provides various benefits and subsidies based on investment and turnover.
- GST Registration: Mandatory for businesses with turnover exceeding ₹40 lakhs (₹20 lakhs for special category states). Required for e-commerce sellers regardless of turnover.
💼 Accounting & Compliance
- Bookkeeping: Systematic recording of financial transactions. First step in the accounting cycle.
- Balance Sheet: Financial statement showing assets, liabilities, and equity. Snapshot of company's financial position.
- Cash Flow Statement: Tracks cash inflows and outflows. Differentiates between operating, investing, and financing activities.
- Financial Audit: Independent examination of financial statements. Mandatory for companies above certain thresholds.
- Internal Controls: Processes to ensure financial integrity. Includes segregation of duties and authorization protocols.
🌍 International Taxation
- Foreign Direct Investment (FDI): Investment by foreign entities in Indian companies. Routes: Automatic and Government approval.
- Transfer Pricing: Pricing of transactions between related entities. Must follow Arm's Length Principle.
- FEMA (Foreign Exchange Management Act): Regulates foreign exchange transactions. Governed by RBI guidelines.
- Permanent Establishment (PE): Fixed place of business in India for foreign companies. Creates tax liability in India.
- Equalization Levy: Tax on digital transactions by non-resident companies. Currently 2% on consideration received for e-commerce supply/services.
📈 Investment & Capital Markets
- Equity Shares: Ownership stake in a company. Offers voting rights and dividends.
- Mutual Funds: Pooled investment vehicle. Types: Equity, Debt, Hybrid, and Solution-Oriented.
- Systematic Investment Plan (SIP): Regular investment in mutual funds. Helps in rupee cost averaging.
- Capital Gains: Profit from sale of capital assets. Classified as STCG or LTCG based on holding period.
- Dematerialization (Demat): Conversion of physical shares to electronic form. Mandatory for trading in Indian stock markets.
📋 Important Tax Forms & Returns
- Form 16: TDS certificate for salaried employees. Issued by employers before June 15th.
- Form 26AS: Consolidated tax statement. Shows TDS, TCS, and advance tax details.
- ITR-1 (Sahaj): For individuals with income up to ₹50 lakhs. Cannot be used if you have capital gains or foreign income.
- GSTR-1: Monthly/quarterly return for outward supplies. Due on 11th of next month.
- MGT-7: Annual return for companies. Filed with MCA within 60 days of AGM.
🔗 Important Resources & Links
- Income Tax Department, Government of India
- GST Portal, GSTN
- Ministry of Corporate Affairs, Government of India
- Reserve Bank of India, RBI
- SEBI Investor Portal, SEBI
🎓 Conclusion
This glossary serves as a comprehensive reference for navigating India's complex financial and regulatory landscape. Whether you're an individual taxpayer, business owner, or investor, understanding these terms is crucial for making informed decisions. For personalized advice tailored to your specific situation, we recommend consulting with a qualified tax professional or financial advisor.
