2. Previous Year (PY)

Under the Income Tax Act, the FY in which the income is earned is called the PY. In India, the PY coincides with the FY.

3. Assessment Year (AY)

AY is the year in which the income of a PY is taken up for assessment by the income tax authorities. The AY is the year following the PY. Let's say income is earned in PY 2007-08, then the same is assessed by the tax authorities in AY 2008-09.

4. E-filing

The process of electronically filing income tax returns through the internet is known as e-filing. To file your returns online, you need to log onto the website of the Income Tax department - www.incometaxindiaefiling.gov.in.

5. Income

For employees, all that is received from an employer in cash, kind or as a facility is considered as income. For businessmen, net profits constitute income. Income may also flow from investments in the form of interest, dividend or commissions. All income is classified into 5 different heads: Income from Salary / Income from house property / Income from business or profession / Income from capital gains / Income from other sources.

6. Capital Gain

Profits arising from the transfer of a capital asset is taxable as capital gains. There are 3 aspects to this: Existence of a capital asset / Transfer of a capital asset / Profit or gains that arise from such a transfer. Incidentally, any loss arising out of sale or transfer of capital assets is termed a capital loss.