DEFINITION:
Direct Tax, like
The burden of indirect taxes, like service tax, VAT, etc. can be passed on to a third party. Income Tax is all income other than agricultural income levied and collected by the central government and shared with the states. According to Income Tax Act 1961, every person, who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance
act.
Such income tax shall be paid on the total income of the previous year in the relevant assessment year.The total income of an individual is determined on the basis of his residential status in India.
Residence Rules:
An individual is treated as resident in a year if present in India :
#for 182 days during the year or
#for 60 days during the year and 365 days during the preceding four years. Individuals fulfilling neither of these conditions are nonresidents. (The rules are slightly more liberal for Indian citizens residing abroad or leaving India for employment abroad.)
#A resident who was not present in India for 730 days during the preceding seven years or who was nonresident in nine out of ten preceding yeas I treated as not ordinarily resident.
#In effect, a newcomer to India remains not ordinarily resident.For tax purposes, an individual may be resident, nonresident or not ordinarily resident.
Non-Residents and Non-Resident Indians:
#Residents are on worldwide income. Nonresidents are taxed only on income that is received in India or arises or is deemed to arise in India.
#A person not ordinarily resident is taxed like a nonresident but is also liable to tax on income accruing abroad if it is from a business controlled in or a profession set up in India.
# Capital gains on transfer of assets acquired in foreign exchange is not taxable in certain cases.
#Non-resident Indians are not required to file a
tax return RELATED TERMS:
ACCUMULATED EARNING TAX:
An additional tax on earnings that a business retains in an attempt to avoid the higher income taxes the owners would be subject to if the earnings were paid out to them as dividends. also called accumulated profits tax.net profit.
Ad Valorem Tax:
A tax based on the assessed value of real estate or personal property. Ad valorem taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major source of revenue for state and municipal governments.
Amortizable Bond Premium:
A tax term referring to the excess premium paid over and above the face value of a bond. Depending on the type of bond, the premium can be tax deductible and amortized over the life of the bond on a pro-rata basis.A bond premium occurs when the price of the bond has increased in the secondary market due to a drop in market interest rates.
Bifurcation:
The term used in finance that refers to a splitting of something into two separate pieces.
Combat Zone:
An area designated as a war zone during a specified period. Members of the military do not need to claim taxable income they earn while working in a combat zone.
Depreciation Recapture:
The gain received from the sale of depreciable capital property that must be reported as income. Depreciation recapture is assessed when the tax basis of an asset exceeds the sale price. The difference between these figures is thus "recaptured" by being reported as income.
Enrolled Agent - EA:
A tax professional authorized by the U.S. government to be able to represent taxpayers in matters concerning the Internal Revenue Service (IRS). Enrolled agents must pass an examination proving competence or having sufficient experience as an IRS employee, as well as passing a background check, before receiving the designation.
Fiscal Imbalance:
A situation where all of the future debt obligations of a government are different from the future income streams. Both of the obligations and the income streams are measured at their respective present values, and will be discounted at the risk free rate plus a certain spread. A vertical fiscal imbalance describes a situation where revenues do not match expenditures for different levels of government. A horizontal imbalance describes a situation where revenues do not match expenditures for different regions of the country.
Gas Guzzler Tax:
An additional tax on the sale of vehicles that have poor fuel economy.
Halloween Massacre:
Refers to Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, announced that all income trusts will be taxed in a similar manner as corporations at a rate over 30% on taxable income, causing unit holders' values to decrease dramatically virtually overnight.
Horizontal Equity:
The theory stating that people in the same income bracket should be taxed at the same rate. tually overnight.
Intaxification:
Slang that describes the feeling of satisfaction and joy that a tax refund creates in a person. This feeling is somewhat misguided because the tax is only refunded because the person paid too much tax during the previous year.
Itemized Deduction:
A deduction from a taxpayer's taxable adjusted gross income that is made up of deductions for money spent on certain goods and services throughout the year. The specific deductions that are allowed are outlined by the Internal Revenue Service and include such expenses as mortgage interest, state and local taxes, gifts, and medical expenses
Kiddie Tax:
A special tax law created in 1986 imposed on individuals under 17 years old whose earned income is more than an annually determined threshold. Any extra income earned above of the threshold is taxed at the guardian's rate.
Loophole:
A technicality that allows a person or business to avoid the scope of a law or restriction without directly violating the law. Used often in discussions of taxes and their avoidance, loopholes provide ways for individuals and companies to remove income or assets from taxable situations into ones with lower taxes or none at all.Loopholes are most prevalent in complex business deals involving tax issues, political issues and legal statutes. They can be found within contract details, building codes, tax codes, among others.
Modified Adjusted Gross Income - MAGI:
The amount of income that determines how much of an individual's IRA contribution is deductible. The modified adjusted gross income is found by taking the individual's adjusted gross income and adding back certain items such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
Notice Of Seizure:
A letter or written notice from the Internal Revenue Service (IRS) informing the recipient that authorization has been given to liquidate his or her assets in order to cover the income taxes due.
Overlapping Debt:
The debt of a political entity, such as a state where its tax base overlaps the tax base of another political entity, such as a city within the state.
Per Diem Payments:
Generally, a specified amount that employers will pay to employees as reimbursement for various expenses. Per diem payments usually assume a set dollar limit, such as $30 per day for meals or $100 per day for lodging. These payments are usually made for employee travel expenses.
Requisitioned Property:
Property that is involuntarily seized by a governmental authority for any reason. Requisitioned property can be taken for a number of reasons relating to furtherance of the public good. It can be of any type, including real estate, vehicles, machinery, office equipment or even personal property.
Yield Tilt Index Fund:
A type of mutual fund that allocates capital as a standard index, by replicating the holdings of a specified stock index, such as the Standard & Poor's 500 Index (S&P 500), except that the fund weights its holdings towards stocks that offer higher dividend yields. Stocks with higher dividend yields are given a greater portfolio weighting, making them represent more of the fund's portfolio than they otherwise would in the standard index.
