TAX PLANNING CONCEPT
DIRECT TAX PLANNING AND MANAGEMENT
Q.1. Distinguish between `Tax planning` and `Tax Management `.
Ans. Tax Planning primarily aims at adopting an arrangement so as to bring about the least incidence of tax under the four corners of low. On the other hand Tax management comprises a wider field that includes Compliances with the statutory provisions of low and prospective planning so as to ease the financial constaints if any, that would arise while discharging the commitments through payments of other laws, claiming the due reliefs arising on account of double. Taxation avoidance agreements or claiming unilateral relief, etc.
|Tax planning||Tax management|
|1. It is a wider term and it includes
2. Its primary aim is minimizing
incidence of tax.
3. It is not essential for every
4. It looks at future benefits arising
out of present action.
5. In tax planning , exemptions,
deductions and reliefs are claimed.
|1. It is first step towards tax planning.
2. Its man is compliance with legal formalities.
3. It is essential for every person otherwise he may
become liable for interest, penalty and prosecution.
4. It relates to past, present and future as in respect
of mistakes etc. it deals with the past.
5. In tax management, the conditions are complied
with to claim the exemptions Deduction and reliefs.
Q.2. Distinguish between` tax planning `tax avoidance` and `tax evasion`. Give illustration of each .
Ans. Tax planning may be defined as arrangement of one`s financial affairs in such a way that without violating in any way the legal provision of income tax act, full advantage is taken of taken of all exemption , deductions, rebates and reliefs permitted under the act. So that the taxable income is reduced and thereby the tax burden on the assessee is minimized.
Tax evasion means intentional reduction of total income by making false claims or by withholding information regarding the real income so that the tax liability is reduced. Tax evasion an illegal, immoral and anti –national practice. Tax evasion ca be done by not recording of all sales , claiming bogus expenses losses and bad debts, and charging personal expenses as business expenses in the books of accounts.
DIFFERENCE BETWEEN TAX PLANNING AND TAX EVASION
|Tax Planning||Tax evasion|
|1. it helps in achieving certain social and
2. it requires through knowledge of relevant
provisions of the Act. Social, economic and
3. It is a legal right and a social responsibility.
4. It helps in economic development of
the country by providing funds for investment
in desired channels.
5. Tax planner does not suffer from
hypertension as he enjoys his fruits freely.
|1. it is a deliberate attempt on part of tax payer by
misrepresentation of fact, falsification of
accounts including downright fraud .
2. it requires boldness to infringe the law.
3. It is a legal offence coupled with penalty a
nd prosecution .
4. It generates black money which is utilized
for extravagant life style, bribery etc/
5. Tax evader always remains in anxiety
of search and seizure.
Tax avoidance it is an art of dodging tax without actually breaking the law. It is a method of reducing tax avoidance by availing of certain benefits from the loopholes in the law. In other words `tax incidence by availing of certain benefits from the loopholes in the
law. In other word s `tax avoidance` is a device which technically satisfies the requirement of the law, but in fact it is not in accordance with the legislative intent.
The following are some of criteria used by courts to define tax avoidance:
1. Use of colorable devices
2. Defeating genuine spirit of law
3. Misrepresentation or twisting of facts
4. Instance where doctrine of substance is defeated.