TAX PLANNING TAX AVOIDANCE & TAX EVASION

PUMMY WADHAWAN BBA 4TH SEM

MEANING OF TAX PLANNING

Tax planning is an art and the exercise of arranging financial affairs of tax payers so as to reduce or delay the tax payment which would be necessary, If the words if tax laws were to be followed in the obvious manner. Tax planning does not mean to go beyond the law or to do some irregularities.

The systematic analysis of differing tax options aimed at the minimization of tax liability in current and future tax periods.

OBJECTIVE OF TAX PLANNING

1) Economic stability-By proper tax planning, taxes legally due are paid regularly without headache either to the tax-payer or to the tax-collector .Tax planning creates a chain of savings and their investments to various Government schemes. This chain ultimately builds up an economically strong, stable, and strain-free nation.
2) Healthy growth of economy- Healthy economic growth of a nation depends upon the saving of earnings and its investment for the development of the nation. A legalized savings of earnings is the prime factor for the healthy growth of the economy of a nation and its people.

3) Minimization of litigation-A tax-payer wants to pay the taxes in minimum and the tax authorities want to collect the maximum.Sometimes,overzealous tax authorities impose heavy taxation.This results in unscrupulous litigation between the tax payer and the tax collectors and ultimately the tax-payer have to take shelter of the court.

MEANING OF TAX AVOIDANCE

Tax-avoidance is a technique by which incomes, expenditure and investments of an assesse are so arranged that without violating tax laws his tax-liability is educed to the minimum by taking advantage of the loopholes or lacunas of tax law.
Tax avoidance ,in a way,is illegitimate though it is not illegal. The arrangement of one's financial affairs to minimize tax liability within the law

MEANING OF TAX EVASION

Tax evasion is a technique of reducing tax-liability or avoiding tax-liability by violating tax laws

It is absolutely illegal.
An assesse who is guilty of tax evasion may be punished by the way of penalty or prosecution.

Tax evasion is violation of tax laws intentionally, knowingly and with the clear intention of defrauding the exchequer.

DIFFERENCE BETWEEN TAX PLANNING AND TAX AVOIDANCE

Tax Planning Tax planning is legal and moral. Tax Avoidance Tax avoidance is legal but it is immoral and illegitimate. It creates black money and give rise to black economy. It defeat the main intention of law.

It helps in sound economic development of the country. It is strictly in accordance with law and observes the real intention of law. It requires full and deep knowledge of law and requires the use of law with intelligency. It is beneficial to the society and nation.

It requires full and deep knowledge of law and requires courage to misinterpret it abd use its loopholes. It is derogatory and harmful to the society and nation.

DIFFERENCE BETWEEN TAX AVOIDANCE AND TAX EVASION

Tax Avoidance Tax Evasion

Tax avoidance is legal through it is immoral and illegitimate.

Tax avoidance is not punishable.

Tax Evasion is illegal and against the tax laws.

Tax Evasion is punishable.

It defeats the main intension of law.

Tax avoidance is the art of dodging tax without breaking the law. It is based on imaginary and misrepresentation or twisting of facts.

It breaks the law.

Tax evasion is tax omission. In it the law is violated.

It is based on suppression or omission of material facts.