TAX PLANNING AND MANAGEMENT

By

LECTURER MINISHA GUPTA

This subject basically deals with
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How tax is calculated How tax can be evaded How tax can be properly planned. How various situations affect the tax planning and management. What all persons or committees are involved in the management and planning of Tax and Liability.

It is a payment to Government.UNIT 1 TAX PLANNING AND MANAGEMENT TAX     A charge or a sum of money levied on person or property for the benefit of state. Profit = Revenue – Expenses. . It is a kind or charge imposed by the state upon the citizens.

TYPES OF TAXES  DIRECT TAXES       INDIREXT TAXES      Income Tax Wealth Tax Corporate Tax Fringe Benefit Tax Dividend Decision Tax Sales/ CST/ VAT Excise Customs Duty Service Tax Entertainment Tax .

Companies Act. Burden of tax cannot be shifted. Regulated under Sales Tax and Excise Duty.    It is levied on Income and Assets. Burden of tax can be shifted. Tax planning avenues are available. Slabs are applicable. It is collected and monitored by CBDT.   . Tax Payer is tax Bearer. There is no system of slabs No such avenues is available. Tax payer is tax Bearer. Regulated under Income Tax.         It is levied upon goods and services. Partnership act. It is collected by Board of Excise and Customs.

. Tax Deductions. It carried out the full enjoyment of Tax Rebates. It is within the four corners of LAW and regarded as fully legitimate.TAX PLANNING    It is arrangement of one’s financial affairs so that legal provisions wont violate. Tax Exemptions.

. To discharge the responsibility of a good citizen. To avoid any sort of litigation. For preparation and maintenance of systematic records.Needs and Objectives of Tax Planning        Tax planning is done for the reduction of Tax Burden. The tax planning avenues provide a financial cushion or backup for the use of contingencies in future. To avoid any type of raid and penalty. To avail the benefit of concessions and exemptions given under law.

To consider all direct and indirect taxes. It should be done as guided by Tax Laws.Perquisites of TAX Planning     To have full usage of tax planning. . To evaluate fully tax planning avenues.

Employees use CBDT (Central Board of Direct Taxes). Etc. . It is a regular feature of business enterprises and a form of tax planning. filing returns and pay taxes. Employers use TDCAN (Tax deduction and collection Account No). It includes getting audited the records.TAX MANAGEMENT      It includes maintenance of records in prescribed format.

Review of departments orders.MAIN AIMS OF TAX MANAGEMENT     Compliance with legal formalities. Taking advantage of various tax incentives and deductions. . Saving from penalties and prosecution.

3. Deduction of tax at source-: It can be done with respect of income from salaries. Employer seek for TDCAN and employee for Pan card. Employer should furnish quarterly and annual returns regarding TDS. horse race.e. TDS should be deposited in government treasury. Form 16. 2. . Employer should furnish to the employee a certificate regarding TDS i.. winning from lottery. etc. 4. 1.AREAS OF TAX MANAGEMENT 1.

1. 2. Tax on Self Assessment Payment on Demand. . Audit of accounts If business income exceeds 40 Lakh. 3. Documentation and maintenance of records. 2. 5. Payment of tax-: Advance payment of Tax. If individual income exceeds 10 Lakh 4.2. Review of Orders. 6. Fulfillment of conditions to claim deductions. 1. Furnishing return of Income. 7. 3.

Tax Holiday for setup of business in backward areas.e. Section 80-IB. A device which technically satisfies requirement of law but not in legal accordance.TAX AVOIDANCE     An art of dodging out i. actually breaking law. Section 80G.Donations are tax exempted. Method of reducing tax incidence by finding out loopholes of law. TYPES    Agricultural Income. It includes attempt to prevent or reduce tax liability. .

Inflation of expenses. Cautious violation of rules. It is not only illegal but also immoral and antinational. MEANS OF TAX EVASION      Falsification of Accounts.TAX EVASION    To reduce tax liability when accounts are interpreted then it is Tax Evasion. Non-disclose of capital gain. . Under tax laws. tax evaders are penalized by heavy duty. Excessive payment of salary.

. Financial Year-: It is the year in which new tax laws are prepared in the Finance Act are implemented.Assessment Year-: The period of time in which the tax liability is assessed and the payment of Tax is made upon the income earned in previous year is known as Assessment Year Previous Year-: It is the year in which income is earned.

TYPES OF ASSESSEE Sole proprietor Hindu Undivided Family. Partnership Firm Company     .ASSESSEE A person whose tax liability is assessed according to the provision of law.

. Sec 80 G-: Donation to approve funds. Deductions that can be claimed by individual. Sec 80-: Income of a disable person.         Sec 80 CCC-: Contribution to Pension Fund. Sec 80 DD-: Expenditure on Medical Treatment for disable dependant.SOLE PROPRIETOR  MERITS   Pay tax as per slab defined by Finance Act. Sec 80 GGA-: Payments for scientific research. Sec 80 D-: Medical health insurance for family members. Sec 80 E-: Interest paid on loan of higher studies. Sec 80JJA-: Profit from business collecting and processing biodegradable waistes.

 DEMERITS      Unlimited liability. Allowed as many deductions as allowed to Sole Proprietor Salary of KARTA is fully tax deductible. HINDU UNDIVIDED FAMILY  TAX LIABILITY     Similar to individual or sole proprietor. . No money received as interest on capital. May have to liquidate assets for discharging liability of companies. Don’t get deduction against payment of salaries. Interest on capital is not allowed. Cannot raise additional capital by way of shares and debentures issue.

. Remuneration paid is allowed as deduction. Interest o capital is allowed as deduction.PARTNERSHIP FIRM Firm registered under Partnership Act. 80GGA and 80JJA. TAX LIABILITY        Pay tax @30% + 10% surcharge + 3% Education cess.  If limit of person exceed then firm adopt company form of business organization.  Limited to 20 person only. Tax deducted under Sec 80G. Probability of raising additional capital can be solved by admitting a new partner. Allowed deduction similar to individuals and HUF.

 If Provident Fund wont comply with 184 Section of Income Tax it is treated as AOP (Association of Persons).DEMEITS  Tax liability is similar to company form of organization but cannot raise capital by issue of share.  It comes to closure if lunacy of partners is found.  Liability of partners is limited to the extent capital contributed. .

excise duty. Deduction on interest paid on debentures and borrowings.COMPANY    As per Indian’s Company’s Act 1956. Maximum amount of tax as no tax slab is available. Salary paid is fully deductible. TAX LIABILITY        Pay tax @30% + 10% surcharge + 3% Education cess. Indirect taxes like custom duty. An artificial person or entity. service tax. Depreciation on assets is fully deductible. . VAT. To pay FBT and DDT and Wealth Tax.

2009-10 Basic Slabs for Individuals :Excemption limit raised from Rs.000 to to Rs.00. 1.50.000 to 1.000 Rs. 5.25.00. 3.000 Up to Rs.60. 5.000 Above Rs.000 Rs. 5.000 Rs. 2.INCOME TAX EXCEMPTION LIMIT.1.000 NIL 10 % 20 % 30 % Basic Slabs for Women under the age of 65 years old :Excemption limit raised from Rs.60. 1.000 to Rs.00.3. 1. 90.3.000 to Rs. Rs. 00.90.001 to Rs.00.80.90.60. 1.000 Above Rs.000 2.00.001 to Rs. 1.000 Rs. 5.00.000 Excemption limit limit raised Up to Rs.40.00.50.000 to Rs. 1. 1. Rs.000 Rs. 3. 3.000 Rs.000 to Rs.40. 1.60. 5. 3.000 Up to Rs.000 NIL 10 % 20 % 30 % Basic Slabs for Senior Citizen (Over 65 years):Excemption raised from from Rs.00.000 2.40.00. 5.000 NIL 10 % 20% Above Rs.00.00.001 to Rs. 2.000 30% .

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