Difference between tax planning,tax avoidance and tax evasion
What is tax planning? What is tax avoidance and tax evasion? Learn the difference between Tax planning,Tax avoidance and Tax evasion in this article.
Difference between Tax planning,Tax avoidance and Tax evasion.
It is a way to reduce tax liability by taking full advantages
provided by the act through various exemptions,deductions,rebates
It is an exercise by which the assessee legally takes advantage of
the loopholes in the Act.
It is the illegal way to reduce tax liability by deliberately
suppressing income or sale or by increasing expenses etc.,which
results in reduction of total income of the assessee.
2)OBJECT- Tax planning:
To reduce tax liability by applying script and moral of law.
To reduce the tax liability to the minimum by applying the script
of law only.
To reduce tax liability by applying unfair means.
3)BENEFIT- Tax planning:
Generally,arises in long run.
Generally,arises in short run.
Generally,benefits do not arise but it causes penalty and
OF LAW- Tax planning:
It uses benefits of the law.
It uses loopholes in the law.
It overrules the law.
5)PRACTICE- Tax planning:
It is tax saving.
It is tax hedging.
It is tax concealment.
6)NEED- Tax planning:
It is desirable.
It is avoidable.
It is objectionable.
7)MORALITY- Tax planning:
It is moral in nature.
It is immoral in nature.
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Responses to "Difference between tax planning,tax avoidance and tax evasion"
24 Jul 2014 Member Level:
Tax Planning is the process of availing deduction under section 10 A of Income Tax Act. It is a legal process.
Tax Avoidance is the process of misinterpreting the provisions of Income Tax Act in order to reduce the amount to be payed as tax. It is illegal to involve in such cases as we being a citizen should pay the right amount of tax to our government.
Tax Evasion is what many people do. It is the method of understating one's income. A person getting Rs. 1 Lakh a year will show his income as only Rs. 50000 a year. This reduces his tax liability but is illegal to do so.
Tax Administration is yet another related topic which the author has not included here. It is the process of making suitable arrangements of Tax Deducted at Source (TDS).
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