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a) TAX EVASION
Tax evasion refers to a situation where a person tries to reduce his tax liability by deliberately suppressing the income or by inflating the expenditure which results into showing of income lower than the actual and resorting to various types of deliberate manipulations. An assessee guilty of tax evasion is punishable under the relevant laws.
There is a thin line of difference between Tax Avoidance and Tax Planning. Any planning done according to legal requirements defeats the basic intention of Legislature behind the statute could be termed as Tax Avoidance. Tax Avoidance is done in such a manner that no infringement of taxation laws and by taking full advantage of loopholes to attract least incidence of tax. Earlier tax avoidance was considered completely Legitimate, but at present it may be illegitimate in certain situations.
b) TAX AVOIDANCE
c) TAX PLANNING
It means arranging the financial activities in such a manner that maximum tax benefits are enjoyed by making use of all beneficial provisions mentioned in the law. Tax planning is permitted and not frowned upon by law. Tax planning is different from Tax Avoidance and Tax Evasion as it is a systematic and scientific planning of companys operation to attract minimum tax liability.
It helps to deal with the burden of direct and indirect taxation during inflation. Helps in proper expense planning, capital budget planning, sales promotion planning etc. Availability of accumulated profits, reserves and surpluses and claiming such expenses as revenue expenditure are possible today because of Tax Planning. In these days saving tax can be seen as nonrepayable interest-free loan taken for government.
For the business entities already in existence: i. Tax planning in respect of corporate restructing; 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.
VARSHA DHANKANI
Thank You
MANISH PUNJABI GAJJAR DHARIT