Understand the various social problems and learn to act ethically.

1. Tax Evasion& Tax Avoidance

2. Define Tax evasion
An illegal practice where a person, organization or corporation intentionally
avoids paying his/her/its true tax liability.
Those caught evading taxes are generally subject to criminal charges and
substantial penalties.

3. Causes ….
• Weak Surveillance System
• Rampant Corruption in Tax Department
• Complicated Tax Laws and Filing Mechanism
• Tax Deductions offering loopholes to Tax Evaders
• Absence of Social security system
• Tax rates are too high
• Lack of Transparency in Government Expenditure

4. Tax Evasion Practice
• Under-reporting,
• Bribery of Tax Officials
• Refusal to pay
• Lobbying of Governments to reduce tax liability or effective
incidence of Tax system
• Lobbying via international Institutions (IMF, World Bank,
World Trade Organization) to achieve effects

5. Tax Avoidance
• Tax avoidance is the legal utilization of the tax regime to
one's own advantage, to reduce the amount of tax that is
payable by means that are within the law.
In other words….
• The use of legal methods to modify an individual's financial
situation in order to lower the amount of income tax owed.
This is generally accomplished by claiming the permissible
deductions and credits.

6. Tax Avoidance practice
oTax planning that may result in tax postponement &
Avoidance in Legal manners.
oTax Deductions (80 CC).
oCharitable contribution etc...

8. Tax Evasion Vs Tax Avoidance
• Tax evasion: the reduction of tax liabilities by not informing
the Revenue of all relevant facts. Tax evasion is illegal and
criminal penalties apply, hence, if caught evading tax the
director/s of the company will be fined and even
imprisoned.
• Tax avoidance: the reduction of tax liabilities within the
framework of the law. Tax avoidance may not always
succeed, but is legal; tax evasion is never legal.

9. Impact….
• India loses 14 trillion rupees ($314 billion) from tax evasion annually..
• Tax evasion actually leads to depriving it of funds for investment in roads, ports,
and power etc…
• Reduction in country’s economic growth
• Income is diverted to this unaccounted sector
• Loss of revenue, increase in inflation.
• Diversion of resources for the purchase of real estate and luxury housing.
• Black money has resulted in transfer of funds from India to foreign countries