Tax Planning & Management

Tax Planning
Tax planning is an arrangement of ones affairs in such a way that the burden of taxation on assessee is reduced to the minimum without violating in any way the legal provisions. It carried out the full enjoyment of Tax Exemptions, Tax Deductions & Tax Rebates. It is within the four corners of Law and regarded as fully legitimate.

Needs and Objectives of Tax Planning

Tax planning is done for the reduction of Tax Burden. To avoid any sort of litigation. To avoid any type of raid and penalty. To avail the benefit of concessions and exemptions given under law. For preparation and maintenance of systematic records. To discharge the responsibility of a good citizen.

Limitations of Tax Planning

Limited Scope for Assessee Taxation laws are dynamic Preconditions are needed to be fulfilled for availing benefits Complicated tax Laws Require knowledge of various Act like Income Tax Act, FEMA etc Expertise in Accountancy needed Income increase results in higher Tax liability

TAX AVOIDANCE
An art of dodging out i.e. actually breaking law. Method of reducing tax incidence by finding out loopholes of law. A device which technically satisfies requirement of law but not in legal accordance. It includes attempt to prevent or reduce tax liability. Examples: Agricultural Income, Section 80G- Donations are tax exempted

TAX EVASION
To reduce tax liability when accounts are interpreted then it is Tax Evasion. It is not only illegal but also immoral and antinational. Under tax laws, tax evaders are penalized by heavy duty. Examples: Falsification of Accounts, Inflation of expenses, Non-disclose of capital gain or other incomes.

Tax Planning
An exercise aimed at reducing tax liability by availing maximum benefits of various exemptions, deductions & rebates

Tax Avoidance
An exercise aimed at reducing tax liability by exploiting some loopholes of the law

Tax Evasion
An exercise of reducing tax liability either by showing lesser income than actual or by hiding the source of any income

Completely with in the framework of law

Legal Deliberate creation of law for wealth generation through encouraged savings and investments Shows honest efforts for benefit of himself and economy as a whole

Tries to locate some weaknesses of law

Illegal & prohibited Against the basic intent/ soul of legislative provisions Shows dishonest nature

Willful disobedience of law

Illegal & attracts penalties White collar crime

Shows dishonest nature and adverse courage to break laws

TAX MANAGEMENT
Regular feature of business enterprises and a form of tax planning. Tax Management refers to compliance of Tax laws It includes maintenance of records in prescribed format It includes getting audited the records, filing returns, TDS and pay taxes

MAIN AIMS OF TAX MANAGEMENT

Tax Management saves the organization from payment of interest, penalties and prosecutions and has nothing to do with Tax avoidance and Tax Evasion rather it deals with compliance with tax rules and regulations. For availing tax related benefits assessee need to fulfill certain preconditions; Tax Management ensures fulfillment of such conditions Needed for Review of departments orders

End of Unit-1