Tax Evasion, Tax Avoidance, Tax Planning & Tax Management

1. Tax Planning & Management

2. Tax Planning
• Tax planning is an arrangement of one’s affairs in such a way that the
burden of taxation on assessee is reduced to the minimum without
violating in any way the legal provisions.
• It carried out the full enjoyment of Tax Exemptions, Tax Deductions & Tax
Rebates.
• It is within the four corners of Law and regarded as fully legitimate.

3. Needs and Objectives of Tax Planning
• Tax planning is done for the reduction of Tax Burden.
• To avoid any sort of litigation.
• To avoid any type of raid and penalty.
• To avail the benefit of concessions and exemptions given under law.
• For preparation and maintenance of systematic records.
• To discharge the responsibility of a good citizen.

4. Limitations of Tax Planning
• Limited Scope for Assessee
• Taxation laws are dynamic
• Preconditions are needed to be fulfilled for availing benefits
• Complicated tax Laws
• Require knowledge of various Act like Income Tax Act, FEMA etc
• Expertise in Accountancy needed
• Income increase results in higher Tax liability

5. TAX AVOIDANCE
• An art of dodging out i.e. actually breaking law.
• Method of reducing tax incidence by finding out loopholes of law.
• A device which technically satisfies requirement of law but not in legal
accordance.
• It includes attempt to prevent or reduce tax liability.
• Examples: Agricultural Income, Section 80G- Donations are tax exempted

6. TAX EVASION
• To reduce tax liability when accounts are interpreted then it is Tax Evasion.
• It is not only illegal but also immoral and antinational.
• Under tax laws, tax evaders are penalized by heavy duty.
• Examples: Falsification of Accounts, Inflation of expenses, Non-disclose of
capital gain or other incomes.

7. Tax Planning Tax Avoidance Tax Evasion
An exercise aimed at
reducing tax liability by
availing maximum benefits
of various exemptions,
deductions & rebates
An exercise aimed at
reducing tax liability by
exploiting some loopholes
of the law
An exercise of reducing tax
liability either by showing
lesser income than actual
or by hiding the source of
any income
Completely with in the
framework of law
Tries to locate some
weaknesses of law
Willful disobedience of law
Legal Illegal & prohibited Illegal & attracts penalties
Deliberate creation of law
for wealth generation
through encouraged
savings and investments
Against the basic intent/
soul of legislative
provisions
White collar crime
Shows honest efforts for
benefit of himself and
economy as a whole
Shows dishonest nature Shows dishonest nature
and adverse courage to
break laws

8. TAX MANAGEMENT
• Regular feature of business enterprises and a form of tax planning.
• Tax Management refers to compliance of Tax laws
• It includes maintenance of records in prescribed format
• It includes getting audited the records, filing returns, TDS and pay taxes

9. MAIN AIMS OF TAX MANAGEMENT
• Tax Management saves the organization from payment of interest,
penalties and prosecutions and has nothing to do with Tax avoidance and
Tax Evasion rather it deals with compliance with tax rules and regulations.
• For availing tax related benefits assessee need to fulfill certain
preconditions; Tax Management ensures fulfillment of such conditions
• Needed for Review of departments orders

10. End of Unit-1