INTRODUCTION

Tax avoidance is the legal usage of the tax regime in a single territory to one's own

advantage to reduce the amount of tax that is payable by means that are within the

law. Sheltering is very similar, although unlike tax avoidance tax sheltering is not

necessarily legal. Tax havens are jurisdictions which facilitate reduced taxes.

While forms of tax avoidance which use tax laws in ways not intended by

governments may be considered legal, it is almost never considered moral in the court

of public opinion and rarely in journalism. Many corporations and businesses which

take part in the practice experience a backlash, either from their active customers or

online. Conversely, benefiting from tax laws in ways which were intended by

governments is sometimes referred to as "tax planning". The World Bank's World

Development Report 2019 on the future of work supports increased government

efforts to curb tax avoidance as part of a new social contract focused on human capital

investments and expanded social protection.

Tax mitigation, "tax aggressive", "aggressive tax avoidance" or "tax neutral" schemes

generally refer to multi-territory schemes that fall into the grey area between

commonplace and well-accepted tax avoidance (such as purchasing municipal bonds

in the United States) and evasion, but are widely viewed as unethical, especially if

they are involved in profit-shifting from high-tax to low-tax territories and territories

recognized as tax havens. Since 1995, trillions of dollars have been transferred

from OECD and developing countries into tax havens using these schemes.

Laws known as General Anti-Avoidance Rule (GAAR) statutes which prohibit "tax

aggressive" avoidance have been passed in several developed countries including

Canada, Australia, New Zealand, South Africa, Norway, Hong Kong and the United
Kingdom. In addition, judicial doctrines have accomplished the similar purpose,

notably in the United States through the "business purpose" and "economic substance"

doctrines established in Gregory v. Helvering and in the UK through the Ramsay case.

Though the specifics may vary according to jurisdiction, these rules invalidate tax

avoidance which is technically legal but not for a business purpose or in violation of

the spirit of the tax code. Related terms for tax avoidance include tax planning and tax

sheltering.

The term avoidance has also been used in the tax regulations of some jurisdictions to

distinguish tax avoidance foreseen by the legislators from tax avoidance which

exploits loopholes in the law such as like-kind exchanges. The United States Supreme

Court has stated that "The legal right of an individual to decrease the amount of what

would otherwise be his taxes or altogether avoid them, by means which the law

permits, cannot be doubted."

Tax evasion, on the other hand, is the general term for efforts by

individuals, corporations, trusts and other entities to evade taxes by illegal means.

Both tax evasion and some forms of tax avoidance can be viewed as forms of tax

noncompliance, as they describe a range of activities that are unfavorable to a state's

tax system.
History

The concept of taxing income is a modern innovation and presupposes several things:

a money economy, reasonably accurate accounts, a common understanding of

receipts, expenses and profits, and an orderly society with reliable records.

For most of the history of civilization, these preconditions did not exist, and taxes

were based on other factors. Taxes on wealth, social position, and ownership of

the means of production (typically land and slaves) were all common. Practices such

as tithing, or an offering of first fruits, existed from ancient times, and can be regarded

as a precursor of the Tax Planning, but they lacked precision and certainly were not

based on a concept of net increase.

Types of Tax Planning:

1. Short-range and long-range Tax Planning: The tax planning which is done annually to

arrive at specific objectives is called short-range tax planning. Whereas, long-range tax

planning does not include immediate pay-offs of any kind.

2. Permissive Tax Planning: Here the planning conforms to law provisions of tax.

3. Purposive Tax Planning: This is the tax planning method that is based on loopholes in the

laws.

Tax planning is a term that stands for calculated application of tax laws, so as to effectively

manage a person’s taxation. Leading to avail the tax benefits as per the law and in accordance with

the interest of the nation and its people.

NEED FOR THE STUDY

In last some years of my career and education, I have seen my colleagues and

faculties grappling with the taxation issue and complaining against the tax deducted

by their employers from monthly remuneration. Not equipped with proper knowledge

of taxation and tax saving avenues available to them, they were at mercy of the

HR/Admin departments which never bothered to do even as little as take advise from

some good tax consultant.

This prodded me to study this aspect leading to this project during my MBA course

with the university, hoping this concise yet comprehensive write up will help this

salaried individual assessee class to save whatever extra rupee they can from their

hard-earned monies.

Every tax payer knows the toll that paying taxes puts on their financial income. To

minimize this impact, tax planning is essential and needs to be done wisely. Tax

Planning helps you to smartly invest in savings instruments, thereby offering

combined benefits of investment growth as well as reduction in the amount of taxes

paid to the Government.

Amongst the popular tax savings instruments available in the market, investing in

a life insurance policy is considered a good option given the benefit it offers to

its beneficiaryin the form of - income protection, extensive life cover, reduction in the

amount of tax paid. According to the Income Tax Act of 1961, life insurance policy

holders are eligible to avail tax benefits.

Several life insurers, such as Max Life Insurance offers life insurance policies as well

as specialized tax savings plans. These plans are best for protection, long-term
savings, and of course, tax planning. There are two kinds of income tax benefits

available through life insurance policies; they are as follows:

Deduction benefit

This refers to the deductions done towards payment of premium for life insurance

policies. Under Section 80C and 80CC of the Income Tax Act, benefits over

deductions are available to individual and members of Hindu Undivided Family.

Under this section, premium paid during the tenure of the policy are eligible for tax

savings. In this case, the policy is required to be availed in the name of the individual,

his/her spouse, or children.

Such deduction is allowed only for premium amount that is valued up to a maximum

of 10% of the total sum insured of the policy that is issued on or after April 1, 2012.

In case the policy is issued before March 31, 2012, then deduction will be allowed on

premium payment of up to maximum of 20% of the sum insured amount.

According to Section 80C of the Income Tax Act, such benefit can only be availed on

investments made up to Rs. 1,50,000in life insurance products.

Under Section 80CCC, deductions are available only on pension plans – a specialized

form of life insurance policies. This section allows deductions for premiums paid

towards the scheme for up to the maximum amount of Rs. 1,00,000.

Under Section 80D, income tax benefit is available to an individual or a member of a

Hindu Undivided Family. This deduction is also available for policy availed in the

name of individual, his/her spouse, and dependent children. Deduction benefit is

available on amount of up to Rs. 15,000. An additional deduction benefit

of Rs. 15,000 is available if the policy is availed in the name of parents. For parents, if

they are senior citizens, higher deduction amount of Rs. 20,000 is permitted.

Under Section 80DD, premium paid for policy availed in the name of disabled

dependent is eligible for deduction amount of up to Rs. 50,000 each year. In case of

severe disability, higher deduction amount of Rs. 75,000 is permissible.

Exemption Benefit

With this benefit, any form of sum received through a life insurance policy is

exempted from taxation.

Under Section 10(10D), sum received under a life insurance policy will be exempt

from tax. This also includes any amount received through the policy in the form

of bonus, or Section 80DD(3), or under Keyman Insurance Policy.

OBJECTIVES OF THE STUDY

 To study taxation provisions of The Tax Planning Act, 1961 as amended by

Finance Act, 2018.

 To explore and simplify the tax planning procedure from a layman’s perspective.

 To present the tax saving avenues under prevailing statures.

 Minimal Litigation: There is always friction between the collector and the payer

of tax. In such a situation, it is important that the compliance regarding tax

payment is followed and used properly so that friction is minimum.

 Productivity: Among the most important objectives of tax planning is

channelization of taxable income to various investment plans.

 Reduction of Tax Liability: As a tax payer, you can save the maximum amount

from payable tax amount by using a proper arrangement of your enterprise

working as per the required laws.

 Healthy Growth of Economy: The growth in an economy depends largely upon

the growth of its citizens. Tax planning estimates generation of white money that

is in free flow.

 Economic Stability: Stability is supplemented when the tax planning behind a

business is proper.
SCOPE OF THE STUDY

 This study may include comparative and analytical study of more than one tax

saving plans and instruments.

 This study covers individual Tax Planning assessees only and does not hold good

for corporate taxpayers.

 The tax rates, insurance plans, and premium are all subject to FY 2017-18 only.

 Reduction of tax liability : Every taxpayer wishes to retain a maximum part of the

earnings, rather than parting with it and facing the resource crunch. It would be in

the interest of assessee to _plan the tax affairs properly and avail the deductions,

exemptions and rebate admissible under the Act.

 Taxpayer can succeed in doing so by keeping an awareness of the implications of

the various business/other transactions as well as updation of his knowledge about

the various concessions of which assessee is eligible.

 Minimisation of litigation : A general visualisation of the tax administration

scenario depicts a tug-of-war that the tax payers are trying their maximum to pay

the least tax and the tax administration attempting to extract the maximum. This

also results in, sometimes, protected litigations. It is in this context that a sound

tax planning pays returns.

 When a proper tax planning is adopted with the provisions of laws, the incidence

of litigation is minimized. This saves the taxpayer from the hardships and

inconveniences caused by the undesired litigations, which at times even stretches

upto the High Court/ Supreme Court levels.

 Productive investments: The taxation laws offer large avenues for the productive

investments of the earnings granting absolute of substantial relief from the

taxation.
 A taxpayer has to be constantly aware of such legal avenues as are designed to

open floodgates of his well-being, prosperity and happiness. When earnings

invested in the avenues recognised by law, they are not only relieved of the brunt

of taxation, but they are also converted into means of furthering earnings.

 Healthy growth of economic : The growth of a nation’s economy is synonymous

with the growth and prosperity of its citizens. in this context, a saving of earnings

by legally sanctioned devices fosters the growth of both, because savings by

dubious means lead to generation of black money, the evils of which are obvious.

 Conversely, tax planning measures are aimed at generating white money having a

free flow and generating without reservations for the overall progress of the

nation. Tax planning assumes a great significance in this context.

 Economic stability : According to the case law of M.V. Valliapan vs. ITO, (1988)

170 1TR 238 (Mad.), “by a proper tax planning, a smooth tax flow from the tax

payer to the tax administration, without recriminations are ensured.

 This results in economic stability by Away of: (a) availing avenues for

productive, investment by the tax payer, and (b) harnessing resources for national

projects aimed at general prosperity of the national economy and reaping of

benefits even by those not liable to pay tax on theer incomes.

 Therefore, notwithstanding the legal rulings in cases like. McDowell and its

English parallels, real and genuine transactions aimed at valid tax planning cannot

be turned down merely; on grounds of reduction of the tax burden.

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the problem. The study of the

research design is descriptive in nature because it throws light on relationship between

age group and income level on tax saving amount. Research methodology for the

present study is as follows:

A.

Objectives of The Study

The purpose of the study is to find out the most suitable tax saving instrument used to

save tax and also to examine the amount saved by using that instrument.

B.

Sample Design

The present study is based on convenience-cum-stratified sampling. Three heads of

occupation have been taken as a sample and two sub-occupations have been identified

from heads shown in table N0. 1.

C.

Sample Unit

The scope of the tax includes the following areas, (a). Business class

(b). Service class(c). Others, like commission agentsThe persons include in this study

are of different age groups and various income groups. The area of the study covers

Haryana and Delhi/NCR, but for the purpose of collecting primary information form

respondents the study has been limited to three heads of income tax. From 2heads, 2

sub occupations have been selected. While selecting three heads enough care has been

taken to see that this sample represents the whole of universe.

 LITERATURE REVIEW

Bagchi, A. and Chand, K. (2016)[22] in their paper on ‘Taxpayer Information

Service”, analyses the requirement for improving information service and taxpayer

segmentation to boost the voluntary compliance. The authors state that providing of

relevant and easily understandable information to taxpayers is an important

responsibility for every country’s revenue body. They enumerate three factors which

play an important role in enhancing taxpayers’ level of voluntary compliance. Those

are, certainty of the tax to be paid, convenience to pay it and the attitude of tax

administration which drives both of these. The author discusses on the changing

attitude of tax administrators towards taxpayers, necessity of tax administration to

plan in order to achieve targets of its various functioning including increased taxpayer

satisfaction. They stress upon the need to understand taxpayer behaviour and

compliance attitudes.

Grag, R. and Karve, N. (2014)[36] analysed the tax litigations in India and detected

root causes for major tax litigations. Problems cited were in assessment orders and at

the assessment stage and concluded that there is a need to improve the quality of

assessments.

Reddy, N. (2012)[35] in its study indicates rampant tax evasion and tax avoidance

practices by domestic and global corporate, its resultant revenue losses to Govt. of

India as well as State’s difficulty in mobilizing and redistribution of its resources.

Study was based on objectives of understanding processes that lead to tax evasion and

tax avoidance in the larger context of globalization; analyzing the working of Indians

tax system including changing structure and growth of tax revenue and ability of tax

mobilization reflected in tax administration; analyzing losses in revenue caused by tax

policy, tax preferences and tax expenditures; enumerate various means of tax evasion

and tax avoidance; and comprehending impact of tax losses on development agenda.

The study evaluates the problems of various developmental finance effected by

various practices of tax evasion and tax avoidance, growth and structure of Indian tax

system and the ability of tax mobilization through tax administration, policy of

Special Economic Zones (SEZs), tax evasion and avoidance in India due to black

economy, capital flight and impact of revenue losses due to tax preferences, tax

evasion and tax avoidance on countries development priority specially the social

sector.

Khwaja, M.S., Awasthi, R. and Loeprick (2011) [33] in their work on edited

version of “Risk-Based Tax Audit” at the World Bank which was based on

experiences of few countries, observed that the main focus of a modern system of

revenue administration is not to collect taxes. In a modern tax system based on self-

assessment and voluntary compliance, tax liabilities are assessed by taxpayers

themselves and paid through banks or State treasury system. Therefore, the main

functions of the revenue administration are (a) to manage tax compliance in order to

detect and prevent delinquent behaviour and (b) to provide taxpayer services and

education in order to help taxpayers to discharge their tax obligations with ease and

with the least complexity and compliance burden. The aim of the risk assessment

auditing standards is to improve the quality and effectiveness of audits by

substantially changing audit practices by providing increased rigor to the audit

process in a number of key areas including the assessments of inherent and controlled

risks and the linking of these risk assessments to further audit procedures.
 BIBLIOGRAPHY
References:

 Bagchi, A. and Chand, K. (2016), Taxpayer Information Service. In Rajiva

Ranjan Singh (Ed.), Challenges of Indian Tax Administration. Gurgaon,

Haryana: LexisNexis. Retrieved from http://www.lexisnexis.in/ challenges-

ofindian-tax-administration.htm (Accessed on 16.10.2016)

 Grag, R. and Karve, N. (2014). Navigating tax controversy in India. India:

PricewatherhouseCoopers Pvt. Ltd. Retrieved from www.pwc.in (Accessed on

01.12.2015)

 Reddy, N. (2012) Tax Evasion, Tax Avoidance and Tax Revenue Loss in

India, a report towards creation of Public Awareness and Action, Centre for

Education and Communication (CEC), New Delhi.

http://works.bepress.com/narasimha_ reddy/6 (Accessed on 01.03.2015)

 Khwaja, M. S., Awasthi, R. and Loeprick (Eds.) (2011), Risk-Based Tax

Audit. World Bank. Retrieved from www.journalofaccountancy.com/

issues/2009/dec/ 20091789.htm (Accessed on 01.03.2015)

Websites:

 http://in.taxes.yahoo.com/taxcentre/ninstax.html

 http://in.biz.yahoo.com/taxcentre/section80.html

 http://www.bajajcapital.com/financial-planning/tax-planning