1. Program
: MBA
Semester
:I
Subject Code
: MF 0012
Subject Name
: Taxation Management
Unit number
:1
Unit Title
: Introduction to Taxation Management
Lecture Number
:1
Lecture Title
: Learning and Ability
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2. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Introduction to Taxation Management
Objectives :
•
•
•
•
•
•
Define the meaning of tax management
Explain the types of taxes
State the methods of tax planning
Define the concept of tax evasion and tax avoidance
Recognize the tax planning for house property and business income
Define the factors affecting the tax planning
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3. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Lecture Outline
•
Introduction
•
Tax Planning and Tax Evasion
•
Tax Avoidance
•
Objectives of Tax Planning
•
Tax Planning of Income from House Property
•
Tax Planning of Business Income
•
Factors Affecting the Tax Planning
•
Activity
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4. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Introduction
•
Today tax liability is a major area of concern for both individuals and
organizations. Introduction to taxation management tells you about the
legal way to minimize the tax liability of an assessee.
•
Therefore tax planning is required by every assessee whether individual or
companies.
•
Basic steps to be performed for the tax planning are:
1.
Calculate your taxable income
2.
Calculate tax payable on gross taxable income for whole financial year.
3.
After you have calculated the amount of your tax liability you have two
options to choose from:
(a)
Pay your tax (No tax planning required)
(b)
Minimise your tax through prudent tax planning
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5. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Types of Taxes
DIRECT TAXES: Taxes collected by the government directly from the tax
payer.
Example: income tax, wealth tax and interest tax
INDIRECT TAXES: Taxes collected indirectly as a part of prices of goods
and services on which these are levied.
Example: excise duty, sales tax, customs duty and value
added tax
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6. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Tax Planning and Tax Evasion
S.No.
1.
2.
3.
4
Tax Planning
Tax Evasion
Tax planning is an act within the
permissible range of the Act
conducted to achieve social and
economic benefits.
Tax planning is a legal right which
enables the tax payer to achieve
social and economic objectives.
Tax evasion is an attempt to avoid
tax by misrepresentation of facts
and falsification of accounts.
Tax
planning
accelerates
development of the economy of a
country by generating funds for
investment in desired sectors.
Tax
planning
promotes
professionalism and strengthens
economic and political situation of
the country.
Tax
evasion
retards
the
development of economy of a
country by generating black money
which works as a parallel economy.
Tax evasion encourages bribery
and weakens economic and political
situation of the country.
Tax evasion is a legal offence which
may
lead
to
penalty
and
prosecution.
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7. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Tax Avoidance
• Tax avoidance is minimizing the incidence of
tax by adjusting the affairs in such a manner that
although within the four corners of the taxation laws,
the advantage is taken by finding out loopholes in
the laws.
Supreme Court of India
• Justice O. Chinnappa Reddy of Supreme Court in
Mcdowell & Co. Ltd. vs. CTO, the evil consequences
of Tax Avoidance are:
1.Substantial loss of much needed public revenue
2.Serious disturbance by piling up of black money
directly causing inflation.
3.Hidden loss to the community by some of the
best brains in the country being involved in the
perpetual war waged between tax avoider and tax
adviser.
4.Sense of injustice and inequality among people.
5.Ethics (or lack of it) of transferring the burden of
tax liability to the shoulders of guideless, good
citizens from those of artful dodgers.
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8. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Methods of Tax Avoidance
Legal entities: People legally defer paying personal taxes by creating a legal
separate entity to which they donate their property
Country of residence: The company or person changes the tax residence to a
place that is a tax haven in order to lower the amount of taxes that they pay.
Double taxation: Many countries charge taxes on the income that has been
earned inside that country without taking into consideration, the resident
country of the firm or person.
Tax avoidance reduces the revenue of the government and also brings
into disrepute, the tax system. Ideally, avoidance of tax should not be
encouraged and the government should also take measures in order to
prevent it.
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9. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Objectives of Tax Planning
Reduction
of
Tax Liability
Minimisation
of
Tax Liability
Healthy Growth
of
Economy
Productive
Investment
Economic stability
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10. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Tax Planning of Income from House
Property
What are the three conditions to be satisfied for property income to be
taxable?
1. The property should consist of buildings or lands appurtenant thereto.
2. The assessee should be the owner of the property.
3. The property should not be used by the owner for the purpose of any business
or profession carried on by him, the profits of which are chargeable to incometax.
Exempted house property income
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11. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Tax Planning of Business Income
• The income from business and profession is known as profit and gains.
• While calculating the profit and gains, we deduct various expenses from it.
•The expenses to be deducted for calculating the gain are defined in the
income tax act.
•Sections 30 to 37 cover expenses, which are expressly allowed as deduction
while computing business income, Sections 40, 40A and 43B cover expenses
which are not deductible
• Important deductions admissible in computing income from business or
profession are contained in Sections 30 to 36 of Income Tax Act
Expenditures not allowed as deduction for purpose of income tax:
•
•
•
•
Deduction of taxes, interest etc. only on actual payment basis
Expenditure in excess of Rs. 20,000 in cash fully disallowed
Interest on delayed payment to small industries
Expenditure for any purpose which is an offence in law
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12. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Factors Affecting the Tax
Planning
• Residential status and citizenship of the assessee
• Heads of income/assets to be included in computing net wealth
• Latest legal position
• Form vs Substance
(a) Form of transaction
(b) Genuineness of transaction
(c) Expenditure
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13. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
Activity
Activity 1
Go to the website given below and learn about various legalities related
to investment planning so as to reduce income tax liability for the year
2010- 2011
http://www.investmentyogi.com/taxes/tax-planning-for-2010.aspx
Activity 2
Visit the link below and find out how Govt. India uses PAN Card
to check tax evasion n the country.
http://www.theindiastreet.com/2007/06/pan-to-check-taxevasion-in-india-by.htm
l
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14. Unit-3 Introduction to Taxation Management
Unit 1- Learning & Ability
THANK YOU
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