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) Tax Evasion:A Forensic Expert’s Viewpoint

CA Vikram Shankar MathurBA (Eco) Hons, FCA, DISA (ICAI), FAFP (ICAI)

+91-9998090111 | +91-8460890111Email: [email protected]

Web: https://fcavsmathurfaculty.wordpress.com

16-Jan-2017CA Vikram S. Mathur1

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Tax Evasion: Defined

16-Jan-2017CA Vikram S. Mathur

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Source: https://en.wikipedia.org/wiki/Tax_evasionExtracted: 09-Jan-2017 10:30 Hours IST

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Tax Avoidance: Defined

– TAX AVOIDANCE: “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.” ~ Judge Learned Hand (http://quotes.liberty-tree.ca/quote/learned_hand_quote_6bf7)


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Tax Avoidance vs Tax Evasion

Tax Avoidance Tax Evasion


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Comparison By Reasons:


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Tax Gap By Reason in UK


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Global Tax Evasion by Profession (in 2009)


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What then are the remedies on a long-term basis?All individuals / corporates / firms / other legal

taxable entities (AOP / BOI / PSU / Trusts etc.) should go for:Tax PlanningTax ManagementCombination of Tax Planning and Tax Management


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What is Tax Planning?


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What are the ways in which tax evasion takes place?


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Who is responsible for Tax Evasion in India. There are many ways and people who practice tax in India , mainly lawyers and chartered

accountants - always are in the lookout for ways to save tax. Some of them, unscrupulous elements – they read between the lines of tax laws and devise the way to evade the tax. The difference between avoidance and evasion is a thin line , which can be judged only from point of context and facts in which the method of saving tax was applied. One way it can be read as avoidance and another way it can be taken as evasion ~ Prashant Thakur @http://taxworry.com – February 2, 2014.

This is where we must mention that there are two major aspects of legally reducing our tax liability: Utilizing Deductions From Income

Taking Capital Losses


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Some Tax Evasion Attempts During Demonitization Gold Purchases:

– In Gujarat, Delhi and many other major cities, sales of gold increased on 9 November, with an increased 20 to 30% premium surging the price as much as 45,000 (US$670) from the ruling price of 31,900 (US$470) per 10 grams (0.35 oz).

Multiple bank Transactions

– There have also been reports of people circumventing the restrictions imposed on exchange transactions and also attempting to convert black money into white by making multiple transactions at different bank branches.


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Seven ways to escape tax legally when investing in the name of family members. Invest gifted money in tax-free instrument

Exhausted your 80C limit? Transfer some money to your non-working spouse or minor child and invest that sum in a tax-free instrument such as PPF or ELSS funds, tax free bonds and Ulips. The gift tax rules won't apply to these relations, including any of your or your spouse's lineal ascendants or de scendants. Therefore, you can transfer any amount you want. Since you are investing in a tax-free instrument, even the clubbing of income clause won't affect your tax liability.

Deduction available in case of minor child

You can claim a deduction of up to `1,500 per child for two children in case of investments made in the name of minors. This means you can invest, say, `15,000 (or `30,000, for two kids) in a one-year FD scheme which gives a return of 10% and be exempt from tax.

There is no tax on long-term gains

Not interested in locking your money in long term investments or fixed assets? Invest the l gift money in stocks and equity mutual funds e and hold for more than a year. There is no capital gains tax on equity assets held for g more than 12 months. In case of gold and property and debt-oriented mutual funds, the holding period is 3 years.

The clubbing is only at the first level If earnings are reinvested, it will be treated as your relative's income.

This means the second year onwards, you'll have no further tax liability on that money. You can use this strategy even if your spouse is earning, but falls in a lower tax bracket.

Adult children are big tax savers The clubbing rule does not apply once your child turns 18. Since the

person is treated as a separate individual for all tax purposes, you can transfer money and enjoy another `2.5 lakh exemption along with all the other deductions and benefits that other taxpayer enjoys. You can start investing if the child is turning 18 before 31 March of that financial year and benefit for the entire year.

Clubbing not applicable in case of parents You can also invest in your parent's name and the best part is the

clubbing rules won't be applicable here. Also, there is no gift tax on the money you give to your parents. So, make use of their a basic tax exemption limit-`2.5 lakh for up to 60 years, `3 lakh for those above 60 and `5 lakh if they are above 80. In case they are exceeding the exemption limit, help them save taxes.

Show the monetary transaction as a loan The clubbing provision is applicable on earnings from gifted money .

However, if you show the transaction as a loan where your relative pays you a nominal interest, income from the investment will not be taxable.


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Source: http://economictimes.indiatimes.com/wealth/tax/seven-ways-to-escape-tax-legally/articleshow/47564284.cms

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AREAS OF TAX PLANNING IN CONTEXT OF INCOME TAX ACT, 1961

For the business entities already in existence:i. Tax planning in respect of corporate restructuring;ii. Tax planning in respect of financial management;iii. Tax planning in respect of employees remunerations;iv. Tax planning in respect of specific managerial decisions;v. Tax planning in respect of Foreign Collaborations and Joint

Venture Agreements;vi. Tax planning in the light of various Double Taxation Avoidance

Agreements.


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Conclusions for curbing Tax Evasion in India It is essential that organizations

and individuals alike go for Tax Planning, with objectives such as:a) Reduction of tax liabilityb) Minimization of litigationc) Productive investmentd) Healthy growth of

economye) Economic stability

Essentials of Tax Planning :a) Up to date knowledge of tax laws and

awareness of judgments made through various decisions of the courts.

b) The disclosure of all material information and furnishing the same to the IT department.

c) Tax Planning should not just comply legal provisions as stated but should be within the framework of law.

d) A planning must be capable of attainment of business objectives and be amenable to its possible future changes.


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3)As can be seen, the

highest income bracket of 6 entities

pay the maximum tax of Rs. 6,872.97 Lakhs, which is

where the maximum attention ought to be

focused.

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On the Lighter Side


26The Cayman has almost completely fixed its tax evasion problem. . . or so you would think, on reading the latest report from its Financial Reporting Authority Cayfin. We can't find a link to the report itself, which doesn't seem to have been published yet, but in any case here is a Chart depicted from a table: ===================So let's see - that shows tax evasion at just one percent of all suspicious activity reports. Impressive! Time to crack open the champagne.

Even more impressive, given that its Confidential Relationships (Preservation) Law states that you can go to prison in Cayman not only for divulging confidential information, but merely for asking for it!

And then there is the whole issue of Cayman directors as a fig leaf, which we noted (and updated) recently.

Joking aside, we should state that while Cayman deservedly has a terrible reputation for its secrecy, it probably isn't as sleazy as some. Such as the British Virgin Islands.

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CA Vikram Shankar Mathur

Mobile: +91-9998090111 / +91-8460890111

Email: [email protected]

Official Website:http://fcavsmathurfaculty.wordpress.com

Personal Website:http://vsmathur.co.in

Facebook Profilehttp://facebook.com/vsmathurco


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For listening so patiently!!