Tax planning is the analysis of a financial situation or plan from a tax perspective. It can be understood as the practice of minimizing tax liability by making the effective use of all applicable allowances, deductions, exemptions, concessions, and rebate, within the framework of law, to lessen the overall income and/or capital gain of the Assessee (Tax Payer). For this purpose, the financial activities of the person or entity are thoroughly analyzed, to seek the maximum possible tax benefit, which is feasible as per the law.
Tax planning is a legal method of reducing the tax burden that covers all kinds of efforts made by the Tax Payer to save taxes, through ways and means that conform to the legal obligations and are not intended to deceive the law, by false pretense.
Purpose of Tax Planning
To ensure tax efficiency. Through tax planning, all elements of the financial plan work together in the most tax-efficient manner possible.
Maximize productive investment,
Reduction of tax liability
So, in tax planning arrangements are made in a way that maximum possible tax benefits can be availed, by making use of all favorable provisions in the act, which facilitates the Tax Payer to get rebates and allowances, without violating the law.
So, in tax planning arrangements are made in a way that maximum possible tax benefits can be availed, by making use of all favorable provisions in the act, which facilitates the tax payer to get rebates and allowances, without violating the law.
Effects of Tax Planning
The main objectives in any exercise on tax planning are to:
- Gain all concessions and relief’s and rebates permissible under the Act.
- Arrange the affairs in a commercial way to minimize the incidence of tax.
iii. Claim maximum relief where taxes are paid in more than one country.
- Become tax compliant and avoid penalties, prosecutions and interest payments.
- Fruitful investment of savings.
- Timely compliance of procedural requirements like tax audit etc.
vii. Appropriate record keeping
viii. Avoidance of litigation.
- Growth of economy and its stability.
- Pay taxes – not a penny more, not a penny less.
For further enquiries on the above, please contact:
Director, Strategy & Operations (SOW)
Director of Centre, International Centre for Tax research & Development (ICTRD)