TAX PLANNING TAX AVOIDANCE &TAX EVASION

ISHPREET SINGH BAGGABBA 4TH SEM

TAX PLANNING

MEANING

• An arrangement of a person’s financial affairs in order to minimize their overall tax burden.

• The legal steps a natural or legal person plans or undertakes to minimize lawfully his/her tax liabilities.

• Tax planning is the process of forecasting one's tax laibility  and formulating ways to reduce it.

TAX PLANNINGOBJECTIVES

a) Reduction in tax-liability:- Main objective of tax planning is the reduction of the tax liability of the tax-payer.

b) Productive investment- The national objective of the tax planning is to channelize the public money or savings of tax-payer towards the productive investments by creating legal awareness among them.

c) Healthy growth of economy- Healthy economic growth of a nation depends upon the saving of earnings and its investment for the development of the nation. A legalized savings of earnings is the prime factor for the healthy growth of the economy of a nation and its people.

TAX AVOIDANCE

• The simple meaning of tax avoidance is the minimization of tax liability by lawful methods.

MEANING

• The process whereby an individual plans his or her finances so as to apply all exemptions and deductions provided by  tax laws to reduce taxable income.

• Tax avoidance ,in a way,is illegitimate though it is not illegal.

TAX EVASIONMEANING

• The simple meaning of tax evasion is using illegal means to avoid paying taxes

• Tax evasion is a technique of avoiding tax liability by violating tax laws.

•  Trying to avoid tax using illegal methods is called tax evasion.• Tax evasion is the general term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means.

Tax Planning Tax Avoidance

Tax planning is legal and moral. Tax avoidance is legal but it is immoral and illegitimate.

It is beneficial to the society and nation.

It is harmful to the society and nation.

It is strictly in accordance with law and observes the real intention of law.

It defeat the main intention of law.

It is based on full and real facts. It is based on imaginary facts.

It helps in sound economic development of the country.

It creates black money and give rise to black economy.

DIFFERENCE BETWEEN TAX PLANNING AND TAX AVOIDANCE

DIFFERENCE BETWEEN TAX AVOIDANCE AND TAX EVASION

Tax Avoidance Tax Evasion

Tax avoidance is legal. Tax Evasion is illegal.

Tax avoidance is the art of avoiding tax without breaking the law.

Tax evasion is tax omission. In it the law is violated.

It defeats the main intension of law. It breaks the law.

Tax avoidance is not punishable. Tax Evasion is punishable.

It is based on imaginary facts. It is based on suppression of material facts.

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