Glossary 5
Tax Planning: Tax planning is the process of analysing a person's or business's financial situation in order to identify tax efficient strategies that can reduce the amount of taxes owed. Here are some important definitions related to tax planning.
Taxable Income: Taxable income is the amount of income that is subject to taxation after deductions and exemptions have been taken into account.
Tax Deductions: Tax deductions are expenses that can be subtracted from taxable income in order to reduce the amount of taxes owed.Examples of tax deductions include charitable donations, mortgage interest, and business expenses.
Tax Credits: Tax credits are dollar-for-dollar reductions in the amount of taxes owed. Examples of tax credits include the child tax credit, the earned income tax credit, and the foreign tax credit.
Dividend Policy: Dividend policy is the set of guidelines that a company follows for paying dividends to its shareholders. Dividends are the portion of a company's profits that are distributed to its shareholders.
Dividend Payout Ratio: The dividend payout ratio is the percentage of a company's earnings that are paid out as dividends. A high payout ratio indicates that a company is distributing a large portion of its profits as dividends, while a low payout ratio indicates that the company is retaining more of its earnings for reinvestment.
Bonus Share: A bonus share is a share of stock that is issued by a company to its existing shareholders as a bonus, without any additional cost to the shareholder. Bonus shares are also known as scrip dividends or capitalisation issues.
TDS: TDS stands for Tax Deducted at Source, which is a system of collecting taxes at the source of income itself. Under this system, a person or entity making a payment to another person or entity is required to deduct a certain percentage of tax at the time of making the payment and remit the same to the government.
TAN: TAN stands for Tax Deduction and Collection Account Number, which is a unique 10-digit alphanumeric code issued to the deductor by the Income Tax Department. The TAN is used to identify the deductor and track TDS payments made by them.
TDS Certificate: A TDS certificate is a document issued by the deductor to the deductee, which contains details of the TDS deducted and deposited with
the government. The deductee can use the TDS certificate to claim credit for the TDS deducted from their overall tax liability.
Advanced Tax Payment: Advanced tax payment refers to the payment of income tax by taxpayers in advance, before the end of the financial year, basedon their estimated income and tax liability.
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