presented by ,

Parth Sonpar
Rajender Dubey
Prince Gor
Pritam Rajkumar
Pruthviraj Jadeja

Tax Avoidance And Tax Evasion

 INDIAN TAX SCENARIO

 The country has over 4.50 lakh registered corporate

bodies of which only 50,000 corporate pay taxes.

 A simplistic interpretation of this could either mean that

these are inefficient corporates or there is income being
concealed.
 POINTS TO PONDER …..

What are you doing ? : Business Pay Professional Tax

What are you doing in Business ?

Selling the Goods Pay Sales Tax

From where are you getting the Goods ?

From Abroad / Other States Pay Customs / Octroi

What are you getting by selling the Goods ?

Profit Pay Income Tax

How do you distribute profit ?

By way of dividend Pay Dividend Distribution Tax

Where do you manufacture the Goods ?

In a Factory Pay Excise Duty

 POINTS TO PONDER …..

Do you have Office / Warehouse ? Pay Municipal Tax

Doing Business in Millions ?

Yes Pay Turnover Tax

No Pay Minimum Alternative Tax

Are you taking out more than Rs 25,000 Cash from Bank ?

Pay Cash Withdrawal Tax

Where are you taking your client for lunch and dinner ?

Pay Food & Entertainment Tax

Are you going out of station for business ?

Yes Pay Fringe Benefit Tax

 POINTS TO PONDER …..

Are you giving or taking any Services ? Pay Service Tax

To reduce tension where are you going ?

To a Cinema Pay Entertainment Tax

Delayed in paying Tax ? Pay Interest & Penalty

 Tax avoidance is the legal utilization of the tax regime to
one's own advantage, to reduce the amount of tax that is
payable by means that are within the law.

 Tax Evasion is the general term for efforts to not pay taxes
by illegal means. 

 Tax planning is a process of looking at various tax options in

order to determine when, whether, and how to conduct
business and personal transactions so that taxes are eliminated
or reduced.
REDUCING TAXABLE INCOME
 The primary way to reduce the part of your income that
is subject to tax is to take full advantage of all available
tax deductions, both business and personal. In order to
do this, you must become aware of what is deductible
and what isn't, and the special rules that apply to certain
types of deductions such as meals and entertainment,
automobile expenses, and business travel.

 In many cases a business owner can deduct benefits that

would otherwise be classified as nondeductible personal
expenses.
REDUCING TAX RATE
 Although you can't literally lower your tax rate, there are
certain actions you can take that will have a similar
result.

 Shifting income from a high-tax-bracket taxpayer (such

as yourself) to a lower-bracket taxpayer (such as your
child). If you have a small business, you can make one
or more children part-owners of your small business, so
that net profits of the business are shared among a larger
group.
TRANSFER PRICING
 If a firm can shift profits to a low-tax jurisdiction from a
high-tax one, its taxes will be reduced without affecting
other aspects of the company.

 Which in turn affects revenues, but it is this artificial

shifting of profits.

 Example: If a patent developed in the U.S. is licensed to an affiliate

in a low-tax country (such as one in Ireland) income will be shifted
if the royalty or other payment is lower than the true value of the
license.
REASONS FOR TAX EVASION

 Weak Surveillance System

 Rampant Corruption in Tax Department

 Complicated Tax Laws and Filing

Mechanism

 Tax Deductions offering loopholes to

tax evaders

 Absence of Social Security System

 Tax Rates are too high

 Lack of Transparency in Government

Expenditure
TAX HAVENS

 A tax haven is a country or territory where

certain taxes are levied at a low rate or not at all.
COUNTRIES LISTED ON VARIOUS TAX HAVEN LISTS

 Caribbean/West Indies - Anguilla, Antigua and Barbuda, Aruba, Bahamas,

Islands, Cayman Islands, Dominica, Grenada.

 Coast of East Asia - Hong Kong, Macau, Singapore.

 Europe/Mediterranean- Andorra, Gibraltar, Isle of Ireland, Liechtenstein,

Luxembourg
Malta, Marino, Switzerland
 Indian Ocean- Maldives, Mauritius, Seychellesa.
 Middle East- Bahrain, Jordan, Lebanon.
 North Atlantic- Bermuda
 Pacific, South Pacific- Cook Islands, Marshall Islands, a Samoa, Nauru,

 West Africa - Liberia

TAX EVASION PRACTICES
 Under-reporting;
 Bribery of tax officials;

 Refusal to pay;

 Lobbying of governments to reduce tax liability or

effective incidence of tax system;
 Lobbying by multinationals of ‘home’ country
governments to pressure ‘host’ country governments to
the same effect; or
 Lobbying via international institutions (IMF, World
Bank, WTO) to achieve similar effects.
GOVERNMENTS EFFORTS
 2% MAT on gross assets could end up to be as much as
or even more than 25% of the profit of a company.
Moreover, they say companies in sectors with a long
gestation period like infrastructure would have to end up
paying the tax even if they make a loss.

 Offshore mergers and acquisitions could come under the

domestic tax net, with the government mulling ways to
block companies from using the shell company route to
ward off revenue officials.
GOVERNMENT EFFORTS TO MINIMIZE
EVASION
 Since 1991, the tax structures have been considerably
rationalized and the process is still continuing.

 Most commodities are now charged to the median rate of

16% excise duty. The customs duty rates have also been
drastically pruned, with only 12.5% as the 'peak rate' of
customs duty.
EXPENDITURE TIPS
 See that credit card expenses do not cross Rs 16,000 a month. An
annual expenditure of more than Rs 2 lakh in a year can result in an
inquiry. Here's a tip: Get a add-on card for your spouse/ family
member. The expenses, thus, get spread out.

 If you plan to buy shares, do not spend more than Rs 8,000 a month

on them. If you are careful and follow this, you will most likely not be
investigated by the tax authorities.

 Buy immoveable property worth Rs 29 lakh, not Rs 30 lakh. Buying

property worth Rs 30 lakh and above could entail an investigation.

 Opt for gold jewellery, semi-precious stones and silver utensils valued
at Rs 14 lakh and no prying questions on wealth tax are hurled.
EXPENDITURE TIPS
A man can also own gold. He can hold 100 grams of the shining metal. A
married woman can safely have 500 grams of gold and an unmarried girl
may hold 250 grams of gold.

An electronic gadget with Rs 25,000 or more always raises suspicions.

Keep loan papers ready if you have borrowed money or show evidence
that the big buy was made out of disclosed income.

Regarding wedding expenses, if you are able to prove that money is

being spent out of income received on wedding occasion under Section
56 (2) (v), then income tax clauses are not attracted.

Bytaking a joint loan, like a housing loan for example, with your spouse,
expenses can be shown by both the wife and the husband in their returns.
EXPENDITURE TIPS
 Income tax returns like Form 2 F ask for household expenses.
But, remember, details are not necessary.

 If your wife is working, many expenses can be shown in her

return statement. Household expenses from dishwashers to
monthly provisions may be covered under this.

 Show a proper balance between income and expenses. If you

have bought an air-conditioner, costing, say, Rs 15,000 and your
income is Rs 20,000, an explanation may be required. But if you
saved Rs 5,000 every month for three months, put them in a bank
and then bought that consumer durable, tax quizzing can be
escaped because then you are ready with your documentation.
RECOMMENDATIONS FROM ECONOMISTS

 Increase the width, not the depth

 The peak rates need to be

brought down from 33% to 15%

 Rich farmers and Software

Companies need to be brought
into the tax net

 The exemptions need to be done

away with and tax compliance
made simpler

 The punishments need to be

more drastic and strictly enforced

 The Government needs to keep

away from Amnesty Schemes
THANK
YOU