1.Introduction to Tax Management and Income from Business

Glossary 

Taxable income: Taxable income is the income on which tax is calculated after

claiming deductions, exemptions, and other allowable expenses.

 Tax deduction: A tax deduction is an expense that can be subtracted from the

gross income of an individual or a company to reduce the taxable income.

 Tax exemption: A tax exemption is an amount of money that is not subject to

tax. It can be claimed on certain types of income or for certain expenses

incurred.

 Tax credit: A tax credit is a direct reduction in the tax liability of a taxpayer.

It is usually based on expenses such as education, health care, or child care.

 Tax bracket: A tax bracket is a range of income levels that are subject to a specific tax rate.

 Capital gains: Capital gains are profits that are earned from the sale of an asset

such as stocks, mutual funds, or property.

 Depreciation: Depreciation is the reduction in the value of an asset over time.

It is used to calculate the cost of the asset over its useful life.

 Tax liability: Tax liability is the amount of tax that an individual or a company

is required to pay to the government based on their taxable income.

 Resident company: A resident company is a company that is incorporated

in a particular country and has its management and control located in that

country. A resident company is taxed on its worldwide income.

 Non-resident company: A non-resident company is a company that is

incorporated outside a particular country but has a presence in that country

through a permanent establishment or branch. A non-resident company is

generally taxed only on the income earned within that country.

 Permanent establishment: A permanent establishment is a fixed place of

business through which a non-resident company carries out its business

activities. It may include a branch, office, factory, workshop, or mine.

 Double taxation: Double taxation is the situation where the same income is

taxed twice by two or more countries. This can happen when a company is

taxed on its worldwide income in its country of residence and also on its income

earned in another country where it has a permanent establishment.

 Minimum alternate tax: It is a tax that is imposed on companies that have a

significant book profit but have not paid any income tax due to various deductions

and exemptions allowed under the tax laws.