Tax planning,evasion and avoidance

basic concepts in tax planning

1. Tax planning, avoidance,
evasion and tax management
Priyanka Naik
CO-34-2013

2. THERE IS NOTHING WHICH
HURTS MORE THAN PAYMENT
OF TAXES…..

3. TAX PLANNING
•Definedasanarrangementofone’sfinancialandeconomicaffairs
bytakingcompletelegitimatebenefitofalldeductions,exemptions,
allowancesandrebatessothattaxliabilityreducestominimum
•Features:
Comprisesarrangementsbywhichtaxlawsarefullycomplied
Nointentiontodeceitthelegalspiritbehindthetaxlaw
Alllegalobligationsandtransactionsaremet
ThegrosstotalincomeofXYZltd.fortheA.Y.2014-2015isRs.
20,00,000.thetaxliabilitywillbeRs.6,60,000.toreduceitstax
liabilitythecompanyavailstotaldeductionofRs.3,50,000u/s
30,31and32.consequentlyitstaxliabilityisRs.5,44,500

4. TAX MANAGEMENT
Taxmanagementreferstothecompliancewiththestatutory
provisionsoflaw.
Itincludesmaintenanceofaccounts,fillingofreturn,paymentof
taxes,deductionoftaxatsource,timelypaymentofadvancetax,
etc.
Whiletaxplanningisoptional,taxmanagementismandatory.
Poortaxmanagementmayleadtolevyofinterest,penalty,
prosecution,etc.Insomecasesitmayleadtoheavyfinanciallossif
propercomplianceisnotmade,e.g.ifalossreturnisnotfiledin
timeitwillresultinafinanciallossbecausesuchlosswillnotbe
allowedtobecarriedforward

5. TAX PLANNING V/S TAX MANAGEMENT
Theobjectiveistoreducetax
liabilitytominimum
Theobjectiveistocomplywiththe
provisionsoflaw
Itisfuturisticinitsapproach Relatestothepast
Itiswideinitscoverageand
includestaxmanagement
Ithasalimitedscope
Thebenefitsarisingaresubstantial
inthelongrun
Asaresultofeffectivetax
management penalty,penal
interest,prosecution,etc.canbe
avoided

6. TAX AVOIDANCE
•Isreducingtaxliabilityinlegallypermissiblewaysandhaslegal
sanction
•Thisisgenerallyaccomplishedbyclaimingthepermissible
deductions
•Features:
Legitimatearrangementofaffairsinsuchawaysoastominimize
taxliability
Avoidanceoftaxisnottaxevasion
Thereisnoelementofmalafidemotiveintaxavoidance
•AcompanyinHaryanawantstostartanewunitintheexisting
premises.Butifitdoessothanitisnoteligiblefordeductionu/s
80IB.SoitdecidestostarttheunitinArunachalPradesh.Nowthe
companygetsthebenefitofdeductionu/s80IB.

7. TAX EVASION
•Allmethodsbywhichtaxliabilityisillegallyavoidedistaxevasion
•Involves:
Statinganuntruestatementknowingly
Submittingmisleadingdocuments
Suppressionoffacts
Notmaintainingproperaccountsofincomeearned
Omissionofmaterialfacts
•Anassesseeguiltyoftaxevasionmaybepunished

8. •Thecompanystartsthenewunitinitsownpremisesbuttoclaim
deductionu/s80IBittakesafactorybuildingonrentinavillagein
ArunachalPradeshandonlyonpaperitisshownthatthenewunit
issituatedinavillage.

9. TAX AVOIDANCE V/S TAX EVASION
Isreducingtaxliabilityinlegally
permissiblewaysandhaslegal
sanction
Allmethodsbywhichtaxliability
isillegallyavoidedaretaxevasion
Takesintoaccountalllegal
provisions
Itisanattempttoevadetax
liabilitybyunfairmeans
Itistaxhedgingwithinthe
frameworkoflaw
Taxevasionistaxomission
Ithaslegalsanction Itisunlawfulandtheassessee
maybepunished
Itisintentionaltaxplanning
beforetheactualtaxliability
arises
Itisanintentionalattemptto
avoidtaxpaymentafterthetax
liabilityhasarisen

10. Thank You