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TAX
PLANNING
What is Tax Planning and Tax Management?
Tax planning is all about making sure you take advantage of
every legal deduction and credit to minimize your tax bill.
A plan that minimizes how much you pay in taxes is referred to as tax
efficient.
Importance of Tax Planning
Reduction in tax liability. one of the most important features of tax planning is to reduce tax liability.
Every individual has done his financial plan so he can reduce his tax amount and can save for his future
plans.
Advance planning. one has to arrange his tax plans at the beginning of the financial year because no one
can plan to reduce his tax liability day before filing an income tax return.
Investment in the right direction. with the help of tax planning one can invest his money in the right
direction by choosing the right policy. Investment in any assets or policy will not help in saving money
from taxes, for this right investment should be done.
Dynamic in nature. tax planning has to be done every year because of the new implementation of
policies introduced by the government. One has to modify his tax plans at the beginning of every
financial year.
METHODS OF TAX PLANNING
Short-range Tax Planning - short-range tax planning involves year to year planning to complete some
specific and limited objects.
Long-range Tax Planning - unlike short range tax planning, long-range tax planning are those activities
undertaken by an assessee, which does not pay off immediately. This starts at the beginning or the income
year to be followed around the year.
Permissive Tax Planning - a strategy that helps you plan your tax saving investments such that you can claim
the maximum permissible deduction limit under different sections of the Income Tax Act, 1961.
Purposive Tax Planning - involves using tax-saving instruments with the specific purpose of getting the
maximum tax benefit by making correct investment selections, suitable replacements of assets, and
diversifying income and business activities.
AREAS OF TAX PLANNING
For implementing tax planning one can use different ways to save his tax money. There are some areas
where we can plan to reduce our tax liability:
Reducing Taxable Income. one can use government schemes and programs to reduce his taxable income, it
will directly reduce his tax liability. One should try to minimize his taxable income to reduce his tax
amount.
Deduction planning. there are many deductions provided by a taxation law. One should implement and
plan those deductions. The major area of the deduction is available under Sec.80C where one can claim a
deduction for life insurance, mutual funds, home loan interest and many more.
Investment in tax planning. assessee can invest in policy for future plans and save his money from tax.
Year-end planning strategies. one can reduce his tax liability for the next year by prepaying those expenses
which will be imposed next year and can make a strategy before starting the new financial year.
Tax planning is an essential part of any financial plan for individuals, families or businesses. Proper planning allows you
to understand which tax benefits you qualify for. You might be able to take advantage of:
Deductions: Tax deductions allow you to reduce your taxable income. They’re usually expenses you incur throughout
the year, which you can subtract from your total income. A deduction might include a charitable donation.
Rebates: Rebates are a form of a refund, which occur after a retroactive tax decrease. Congress sometimes offers
rebates to help stimulate the economy during financial recessions. They’re also used to incentivize environmentally
friendly practices.
Credits: Credits allow you to subtract from the total you owe. If you’re a student, a low-income family or you have
children, you may qualify for a tax credit.
Concessions: A tax concession is a government reduction in the amount a certain group of people owes. They’re usually
used to incentivize certain behavior.
Exemptions: Exemptions reduce or eliminate someone’s responsibility to pay. Dependent-related exemptions allow you
to reduce your taxes by a certain amount for each child or other relative under your care.
DIFFERENT TYPES OF TAX PLANNING:
Federal income tax planning: It’s wise to plan your federal income taxes. Federal income tax deductions
might include student loan interest, college savings and charitable donations.
Retirement tax planning: With proper planning, you can reduce your tax liability and maximize your income
post-career. This involves best utilization of an individual retirement account or 401(k) plan and careful
calculation of your Social Security benefits.
Estate tax planning: When someone passes away, their estate may be subject to federal estate taxes. Those
who fall into this category require estate tax planning to preserve their estate’s value. Some states also
demand an estate tax, sometimes at lower value thresholds.
Small business tax planning: Small business and self-employed workers have unique tax responsibilities.
Applying the right deductions is critical. For instance, if you work out of a home office, you may be eligible
for a deduction. You might also deduct the cost of vehicles, office equipment, travel and other business-
related expenses. If you’re starting a new business, it’s important to take advantage of any tax relief.
SAVANT
FRAMEWORK
SAVANT FRAMEWORK
STRATEGY TRANSFORMING
VALUE - ADDING
The overall plan for deploying resources to establish a favorable position
and to achieve short-term and long-term objectives of an entity, consistent
with the ultimate aim of adding value to the entity.
SEC. 2. Powers and Duties of the Bureau of Internal Revenue. - The Bureau of
Internal Revenue shall be under the supervision and control of the Department
of Finance and its powers and duties shall comprehend the assessment and
collection of all national internal revenue taxes, fees, and charges, and the
enforcement of all forfeitures, penalties, and fines connected therewith,
including the execution of judgments in all cases decided in its favor by the
Court of Tax Appeals and the ordinary courts. The Bureau shall give effect to
and administer the supervisory and police powers conferred to it by this Code
or other laws.
The Bureau of Internal Revenue is divided into:
National Office
General direction, guidance and control of the entire
operations
It consists of:
1. The Commissioner
• A regional office covers several provinces (including cities). Each regional office is
responsible for directing and coordinating the operation of the following divisions:
a. Assessment
b. Human Resource
c. Collection
d. Finance
e. Monitoring
f. Administrative Division
g. Legal
FIELD OFFICES
(2) On the part of the taxpayer, these are legal actions which a
taxpayer can avail of to seek relief from the undue burden of
oppressive effect of tax laws, or as a means to check possible
excesses by revenue officers in the performance of their duties.
B. Assessment Process
Tax Audit or Investigation
The BIR conducts an audit by issuing Letter of Authority (LOA).
Letter of Authority
Is an official document that empowers a Revenue Officer to examine and scrutinize a taxpayer’s books
of accounts and other accounting records, in order to determine the taxpayer’s correct internal revenue tax
liabilities.
Person Authorized
• Commissioner of Internal Revenue (CIR)
• Regional Director
ISSUANCE OF NOTICE OF DISCREPANCY (NOD)
When Issued?
1) The taxpayer failed to respond to the PAN; or
2) The reply to the PAN was found to be without merit.
Remedy of the Taxpayer
1) File a protest to the CIR or his authorized representative within 30 days from date of receipt of
the FAN.
Types of Protest
• Request for Reconsideration
Refer to a plea of re-evaluation of assessment on the basis of existing records without need
of additional evidence. It may involve both a question of fact or of law or both.
• Request of Reinvestigation
Refer to a plea of re-evaluation of an assessment on the basis of newly discovered or
additional evidence that taxpayer intends to present in the reinvestigation. . It may involve both a
question of fact or of law or both.
2) Submit all supporting documents within 60 days from filing of protest (in case of request for
reinvestigation under RR 18-2013).
FINAL DECISION ON A DISPUTED ASSESSMENT (FDDA)
If the BIR do not agree with the protest, then a Final Decision on Disputed Assessment (FDDA) will be
issued, where the taxpayer has the right to elevate the case to the CTA.
METHODS OF COLLECTION
The BIR can collect delinquent internal revenue taxes through the following means:
1) Distraint – the seizure by the government of government of personal property, tangible or intangible to
enforce the payment of taxes.
a. Actual Distraint - personal property is physically seized by the BIR and offered for sale at public
auction. The property is sold to the highest bidder and the proceeds of the sale are applied to the
payment of the tax due.
Garnishment - is the distraint of bank accounts.
b. Constructive Distraint - the person in possession of personal property is made to sign a receipt,
undertaking that he will preserve the property and will not dispose of the property without the express
authority of Bureau of Internal Revenue (BIR).
2) Levy
The seizure by the government of real properties and
interest in or rights to such properties in order to enforce
the payment of taxes.
3) Judicial proceedings
a.Filing of civil case for collection
b.File a criminal case (TAX Evasion)
D. COMPROMISE
GROUNDS
1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or
2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.
MINIMUM AMOUNTS
5) For cases of financial incapacity, a minimum compromise rate equivalent to 10% of the basic assessed tax; and
6) For the cases, a minimum compromise rate equivalent to 40% of the basic assessed tax.
H. REFUND OF TAXES
REQUISITES:
1) A tax was erroneously or illegally collected by the BIR;
2) The taxpayer should file a written claim for refund or tax credit with the CIR within 2 years from the date
of payment of the tax or penalty; and
3) If the claim for refund is denied by the CIR, file a petition for refund with the CTA:
a. Within 30 days from receipt of the denial; and
b. Within two years from the date of the payment of the tax or penalty