Tax Planning
Tax Planning
TAX PLANNING
BY
CA R.S.SIVARAMAN
M.Sc., M.Com., ACA., DISA(ICAI).,PGDCA
COVERAGE
THREE METHODS-RATING
1.Tax evasion -
VERY BAD
2.Tax Avoidance OK
3.Tax Planning -
VERY GOOD
TAX EVASION
Tax evasion means avoiding of tax liability
illegally.
It is evading tax by dishonest means
Examples are
1.Concealment of income
2.Inflation of expenses to suppress income
3.Falsification of accounts
4.Conscious violation of rules
TAX EVASION-contd
Tax evasion is unethical and have to be
condemned
The courts also do not favour such means
Evasion, once proved, not only attracts
heavy penalties but may also leads to
prosecution
Such an evader of tax is not a good citizen
Tax evasion as a means to reduce tax
liability cannot be advocated by any one.
TAX AVOIDANCE
Tax avoidance is the art of dodging
(evading) tax without breaking law
It is minimising the tax by taking
advantage of loopholes in the laws
It is lawful but involves the element of
malafide intention
It defeats basic intention of the legislature.
TAX PLANNING
Tax planning is the arrangement of financial
activities in such away that maximum tax
benefits are enjoyed by making use of all
beneficial provisions in the tax laws.
It entitles the assessee to avail certain
exemptions, deductions and relief so as to
minimise his tax liability
Tax planning is intelligent application of expert
knowledge of planning the tax
It is 100% legal
Tax Evasion
Tax Evasion
TAX MANAGEMENT
Refers to the compliance with the statutory
provisions of law
Tax planning is optional but tax
management is mandatory
It includes maintenance of accounts, filling
of returns, payment of taxes, TDS, timely
payment of advance tax
Poor tax management may lead to levy of
interest ,penalty, prosecution etc
1.Location of Business
2.Nature and Size of business
3.Form of business organisation
4.Specific management decisions like make or
buy, own or lease
5.Employee remuneration
6.Mergers/Amalgamation of companies
7.Double Taxation relief
8.Non-residents
9.Advance ruling
LOCATION OF BUSINESS
S..
N
SEC
PARTICULARS
10 A
10 AA
10 B
80-IAB
80-IB
80-IC
80-ID
Profits & Gains from business of hotels & convention centre in specified
area
80-IE
NATURE OF BUSINESS
S..N
SEC
PARTICULARS
10 A
10 AA
10 B
80-IA
80-IAB
80-IB
80-IC
80-ID
Profits & Gains from business of hotels & convention centre in specified area
80-IE
10
80JJA
11
80JJAA
12
33 AB
NATURE OF BUSINESS-CONTD
S..N
SEC
PARTICULARS
13
33 ABA
14
35D
15
35E
16
44AD
17
44 AE
18
44 AF
Retail business
19
44 B
Shipping Business
20
44 BBA
Operation of aircrafts
FORM OF OWNERSHIP
1.Sole proprietorship
2.Hindu Undivided Family
3.Partnership Firm
4.Company
1.Capital structure
2.Lease or buy decisions
3.Make or buy decisions
4.Repair/Renewal or replacement of
assets
Employee remuneration
For employer
Salary in whatever form allowed as
deduction ie expenses to be allowed
For employee
Tax free perquisite-medical facility,
reimbursement of medical exp, free lunch,
LTC, telephone at residence of employee