Half the confusion business owners face with tax compliance isn’t the compliance itself, it’s the terminology. Notices, forms, and filings all come loaded with terms that get thrown around as if everyone already knows what they mean. Here’s a plain-language breakdown of the ones that come up most often.
PAN and TAN
PAN (Permanent Account Number) identifies you or your business for all tax purposes, it’s needed for filing returns, opening bank accounts, and most financial transactions above a threshold.
TAN (Tax Deduction and Collection Account Number) is separate, and only required if you deduct tax at source (TDS) from payments you make, salaries, contractor payments, rent above a certain limit, and so on.
Assessment Year vs Financial Year
The Financial Year (FY) is the year in which you earn the income, April to March. The Assessment Year (AY) is the year immediately after, when that income is assessed and taxed. Income earned in FY 2025-26 is assessed in AY 2026-27. Getting these two mixed up is one of the most common filing errors.
TDS and TCS
TDS (Tax Deducted at Source) is tax withheld by the payer before making a payment to you, salary, professional fees, rent. TCS (Tax Collected at Source) works the other way, a seller collects tax from the buyer on certain transactions. Both show up in your Form 26AS and need to be reconciled when filing your return.
Presumptive Taxation
Under sections like 44AD, 44ADA, and 44AE, eligible small businesses and professionals can declare income at a prescribed rate of turnover, without maintaining detailed books of account. It simplifies compliance significantly, but only applies below certain turnover thresholds and to specific categories of taxpayers.
Statutory Audit vs Tax Audit
A statutory audit is a company law requirement, applicable regardless of turnover, for companies registered under the Companies Act. A tax audit under the Income-tax Act kicks in once turnover crosses a specified threshold, and is a separate requirement even for businesses that aren’t companies.
Input Tax Credit (ITC)
Under GST, ITC lets you reduce your output tax liability by the GST you’ve already paid on business purchases. Claiming it correctly, and reconciling it against your supplier’s filings, is one of the most common sources of GST notices when it’s mismatched.
Advance Tax
If your total tax liability for the year exceeds a threshold, you’re required to pay it in instalments through the year rather than as a lump sum at filing time. Missing these instalments attracts interest, even if you eventually pay the full amount by the filing deadline.
Not Sure Which of These Apply to You?
Terminology is only half the problem, knowing which rules actually apply to your specific situation is the harder part. If you’d rather have someone confirm it than guess, get in touch with our team for a compliance review.
