Tax planning & Management

Direct Tax Planning

1. FIRST UP
CONSULTANTS
Tax planning
&
Management

2. FIRST UP
CONSULTANTS
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Tax
Management
Tax Planning
Tax
Avoidance
Tax Evasion

3. FIRST UP
CONSULTANTS
Tax management
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Tax management means, the management of finances,
for the purpose of paying tax.

The objective of Tax Management is to comply with
the provisions of Income Tax Law and its allied rules.

Tax Management deals with filing of Return in time,
getting the accounts audited, deducting tax at source
etc.

4. FIRST UP
CONSULTANTS
Tax planning
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Tax planning is the analysis of a financial situation or
plan from a tax perspective.

It can be defined as an arrangement of one’s financial
and economic affairs by taking complete legitimate
benefits of all deductions, exemptions, allowances and
rebates so that tax liability reduces to minimum.

The purpose of tax planning is to ensure tax efficiency

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CONSULTANTS
Objectives /Significance of tax planning
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Minimization of
Tax liability
Reduction of
litigation
Productive
Investment
Economic
Stability
Expenses/Capital
Budget Planning
Inflation
Management

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CONSULTANTS
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Basis Tax Planning Tax Management
Objective Minimizing tax liability Comply with the provisions of Income Tax
Law and its allied rules.
Scope Tax Planning also includes Tax
Management

Tax Management deals with filing of
Return in time, getting the accounts
audited, deducting tax at source etc.

Application Tax Planning relates to future.
(Futuristic)
Tax Management relates to Past , Present,
Future.

Benefits helps in minimizing Tax
Liability in Short-Term and in
Long Term.

helps in avoiding payment of interest,
penalty, prosecution etc.
Nature Optional Mandatory

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CONSULTANTS
Tax avoidance
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•The line of demarcation between tax planning
and tax avoidance is very thin and blurred.

•Tax avoidance is the use of legal methods to
modify an individual's financial situation to
lower the amount of income tax owed.

•However, when tax planning focuses on legal
provisions for tax minimization, the thrust of tax
avoidance is on legal loopholes.
•There is no element of mala fide involved in tax
avoidance

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CONSULTANTS
Tax evasion
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•Tax evasion is an illegal activity in which
a person or entity deliberately avoids
paying a true tax liability.

•Tax evasion may include stating an untrue
statement knowingly, submitting
misleading documents, suppression of
facts, omission of material facts on
assessment etc.

•Those caught evading taxes are generally
subject to criminal charges and substantial
penalties.

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CONSULTANTS
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Basis Tax Avoidance Tax Evasion
Objective Minimizing tax liability To avoid tax payment
Application Using legal loopholes to reduce
tax liability

Illegal attempts to evade tax liability with
the help of unfair means/methods

Scope It is a form of tax hedging
within the framework of law
Tax evasion is illegal tax omission

Legal
sanction
Tax avoidance has legal
sanction (no element of
malafide)

No legal sanction
Nature Intentional tax planning before
the actual tax liability arises
Intentional attempt to avoid payment of tax
after the liability of tax has arisen.

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CONSULTANTS
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Line
of
Demarcation

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CONSULTANTS
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CONSULTANTS
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Vs.
Vodafone International Holdings limited Vs. Union of India & Anr

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CONSULTANTS
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CONSULTANTS
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Hutchinson Telecom International Limited (HTIL)
(Owns 100% stake in CGP Investments Holdings Limited)
CGP Investments Holdings Limited (CGP)
(Owns 67% stake in Hutchinson Essar Limited)
Hutchinson Essar Limited

15. FIRST UP
CONSULTANTS
The chaos begins…!
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HTIL transfers 100% shares of CGP Investment holdings
to Vodafone International for Rs. 56,000 crores.
By this transfer, HTIL sold its rights in HEL to Vodafone.
(In finance, such transfers are called indirect transfer)
Being a tax haven country, the Mauritius Government does
not impose any tax on such business transactions.
However, GOI, through an assessing officer pleaded to the
Bombay HC that this transaction was done to take
advantages of the tax havens in Mauritius.
Since, Hutchinson Essar Limited is an Indian Company,
the tax liability arising out of the capital gain is liable to be
paid in India.

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CONSULTANTS
The Bombay high court’s view
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CONSULTANTS
Supreme court’s view
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CONSULTANTS
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• “every man is entitled, if he can, to order his affairs so that the tax attaching under the
appropriate Acts is less than it otherwise would be”.

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CONSULTANTS
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CONSULTANTS
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21. FIRST UP
CONSULTANTS
TAX MANAGEMENT
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TDS CTS PAYMENT
ACCOUNT
MAINTANANCE
AUDIT OF
ACCOUNTS
PAYMENT OF
CERTAIN SUMS

22. FIRST UP
CONSULTANTS
LIMITATIONS OF TAX PLANNING
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No scope for
rectification/
revision
Overlapping
laws
Social Issues
Investment
of time
Frequent
changes
Statutory
requirements

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CONSULTANTS
Tax planning for
Individuals
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CONSULTANTS
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CONSULTANTS
Residential status and
Incidence of tax
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CONSULTANTS
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27. FIRST UP
CONSULTANTS
Agri – Income is tax free for every assessee
u/s 10 (1)
Even an NRI may make domestic
Investments in such avenues
Income from a firm, which has agricultural
income, is also treated as Agri-Income.

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Agricultural Income

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CONSULTANTS

Maintaining the ancestral property
Amount received from the family is not
taxable in the hands of the Individual
member.

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HUF

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CONSULTANTS
Transfer of Properties to major
sons/daughters
 Handicapped minor Child
 Grand-Children
 Maternal Relatives
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Gifts

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CONSULTANTS
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31. FIRST UP
CONSULTANTS
Investment of money of minor child
• Shares/Bullion – Indexed cost benefits
and lowered tax rates on LTCG
• Construction of residential house – The
income may be exempted u/s 23(2)
 Income of the Minor Child
• The income can be invested in PPF
(Deduction available u/s 80c) and the
interest on such investment is exempted
u/s 10.
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Income of Minor Child

32. FIRST UP
CONSULTANTS
Property transferred before marriage.
• Should be a transfer without
consideration
• Permanent elimination of tax liability
 Transfer in lieu of dead assets
 Income from transferred assets
 Income to spouse from Concerns in
which the other spouse has substantial
interest
 Transfer of money ( can be invested in
PPF, bullion, residential house)
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Income of Spouse (Sec 64)

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CONSULTANTS


Property transferred before marriage.
 Transfer of one house (w.e.f AY 2019-20)
 Transfer of property to HUF
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Income of Daughter in law

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CONSULTANTS
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Precautions to be taken while planning your tax
Thorough knowledge of the tax laws

Should not be attempted in isolation
(Sec 80IE)
(Wealth tax)

Should not be based on tax avoidance

Should not be based on court decisions

35. FIRST UP
CONSULTANTS
Cases
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CIT v. R.R Bajoria
•Calcutta HC, 1988, CCA
CIT v. B.C Srinivasa Setty
•SC, 1981, CG from Goodwill
Cloth traders pvt ltd v. Addl CIT
•SC, 1979, Sec 80M

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CONSULTANTS
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Precautions to be taken while planning your tax
Future Perspective

Choosing the best alternative