2. Tax planning can be defined as an
arrangement of one’s financial and
business affairs by taking legitimately in full
benefit of all deductions, exemptions, allowances
and rebates so that tax liability reduces to
minimum.
3.
4. It is not avoidance to payment of tax.
Tax planning should not be done with an
intent to defraud the revenue.
All transactions with respect to tax planning
should be in correct form and substance.
Tax planning works within the framework of
law and its not illegal.
5.
Taxpayers generally plan their affairs so as to
attract the least incidence of tax.
Taxpayer spares no efforts in maximising his
profits and attracting the least incidence. The tax
gatherer, on the other hand. Tries to break the plans
whose sole objective is to save taxes.
Three common practice to save taxes:
a) Tax Evasion;
b) TaxAvoidance;
c) Tax Planning.
6. It means arranging the financial activities in such
a manner that maximum tax benefits are enjoyed
by making use of all beneficial provisions
mentioned in the law.
Tax planning is permitted and not frowned upon
by law.
Tax planning is different from TaxAvoidance and
Tax Evasion as it is a systematic and scientific
planning of company’s operation to attract
minimum tax liability.
7. a) Reduction of tax liability
b) Minimisation of litigation
c) Productive investment
d) Healthy growth of economy
e) Economic stability
8. No tax planning would lead to least benefits.
Tax planning is more reliable as Tax Evasion and
TaxAvoidance are wrong means to save taxes.
Government has provided companies with
incentives in tax laws so planner gets the
advantage to use such incentives.
With increase in profits, the quantum of corporate
tax also increases and it necessitates the devotion
of adequate time on tax planning.
9. It helps to deal with the burden of direct and
indirect taxation during inflation.
Helps in proper expense planning, capital budget
planning, sales promotion planning etc.
Availability of accumulated profits, reserves and
surpluses and claiming such expenses as revenue
expenditure are possible today because of Tax
Planning.
In these days saving tax can be seen as non-
repayable interest-free loan taken for government.
10. Up to date knowledge of tax laws and awareness of
judgments made through various decisions of the
courts.
The disclosure of all material information and
furnishing the same to the IT department.
Tax Planning should not just comply legal
provisions as stated but should be within the
framework of law.
A planning must be capable of attainment of
business objectives and be amenable to its possible
future changes.
11. a) Short-range and Long-range tax planning
b) Permissive tax planning
c) Purposive tax planning
12. At the time of setting up of new business entity:
i. Form of organisation/ownership pattern;
ii. Locational aspects;
iii. Nature of business.
13. For the business entities already in existence:
i. Tax planning in respect of corporate restructing;
ii. Tax planning in respect of financial management;
iii. Tax planning in respect of employees remunerations;
iv. Tax planning in respect of specific managerial
decisions;
v. Tax planning in respect of Foreign Collaborations and
JointVentureAgreements;
vi. Tax planning in the light of various Double Taxation
AvoidanceAgreements.
