Methods of Tax Planning

1. Prof Avtar Singh
Tax Planning a Theoretical
perspective

2. Need and Implications ofTax
Planning
Requirements for Tax Planning
Limitations of Tax Planning
Methods for Tax Planning
Precautions in Tax Planning
Prof Avtar Singh

3. Need and Implications of Tax
Planning
Reduction in Tax Liability
Minimisation of litigation
Productive Investment
Reduction in costs and hence more profits
Growth of economy
Employment
Prof Avtar Singh

4. Requirements of Tax Planning
Thorough knowledge of Tax Law
Knowledge of other laws
Futuristic as well as retrospetive
Timing
Prof Avtar Singh

5. Limitations
If a deduction has not been claimed before assessment, it cannot be claimed
afterwards.
Social, moral and psychological implications have to be considered.
Tax Planning is not dependent on Tax laws alone it is dependent on other laws
and economic conditions.
With increase in profits taxes also increase
Frequent amendments in tax law.
Certain tax provisions may be retrospective.
Prof Avtar Singh

6. Methods of Tax Planning
 Choosing suitable form of business organisation
(Sole Proprietor/HUF/ Partnership/Co-operative
Society/Company/Trust etc.)
 selection of type of business/industry and location
thereof.
 Choosing suitable method of accounting.
 Finalizing salary/perks structure of employees.
 Formation of private trusts etc.
 Gifting away amounts to close relatives to reduce
taxable income.
Prof Avtar Singh

7. Methods of Tax planning
contd…
•Managing with the clubbing provisions of section 64.
•Acquisition of plant and machinery and other fixed
assets.
•Fixing up the setting up date and date of
commencement of business.
•Maximum utilization of all the concessions, exemptions
and deductions available under the Income-tax Act,
1961.
•Designing suitable capital structure.
•Proper deployment of capital gains to minimize tax
liability.
Prof Avtar Singh
•Framing appropriate foreign collaboration agreements.