Tax Planning.

Tax Planning is an activity conducted by the tax payer to reduce the tax liable upon him/her by making maximum use of all available deductions, allowances, exclusions, etc. feasible under law. In other words, it is the analysis of a financial situation from the taxation point of view. The objective behind tax planning is insurance of tax efficiency. Tax planning allows all elements of the financial plan to function in sync to deliver maximum tax efficiency.

Objectives of Tax Planning

  • Minimal Litigation: There is always friction between the collector and the payer of tax. In such a situation, it is important that the compliance regarding tax payment is followed and used properly so that friction is minimum.
  • Productivity: Among the most important objectives of tax planning is channelization of taxable income to various investment plans.
  • Reduction of Tax Liability: As a tax payer, you can save the maximum amount from payable tax amount by using a proper arrangement of your enterprise working as per the required laws.
  • Healthy Growth of Economy: The growth in an economy depends largely upon the growth of its citizens. Tax planning estimates generation of white money that is in free flow.

Types of Tax Planning

  • Short-range and long-range Tax Planning: The tax planning which is done annually to arrive at specific objectives is called short-range tax planning. Whereas, long-range tax planning does not include immediate pay-offs of any kind.
  • Permissive Tax Planning: Here the planning conforms to law provisions of tax.
  • Purposive Tax Planning: This is the tax planning method that is based on loopholes in the laws.

Tax planning is a term that stands for calculated application of tax laws, so as to effectively manage a person’s taxation. Leading to avail the tax benefits as per the law and in accordance with the interest of the nation and its people.

Tax Planning in India

Indian law offers a variety of tax saving options for the taxpayers, allowing for a large range of options for exemptions and deductions through which you could limit your overall tax output.

  • The deductions are available from Sections 80C through to 80U and can be utilised by eligible taxpayers.
  • All these deductions happen against quantum of tax liabilities.
  • There many other sections under the Income Tax Act, 1961 such as exemptions and tax credits that can lower your tax liabilities.

Corporate Tax Planning

This is a way of lowering the liabilities on a registered company. One of the most used methods is by including the deductions on business transport, health insurance of employees, etc. With tax deductions and exemptions provided under the Income Tax Act, 1961, your enterprise can largely reduce its tax burden in a legal way.
Rising profits of an enterprise means higher liabilities of tax. In such a situation, it is important that they dedicate enough time on tax planning that reduces liabilities. With a tax plan, both direct tax and indirect tax is lessened at the time of inflation. Not just this Tax-Planning means a proper planning of:

  • Expenses.
  • Capital budget.
  • Sales and Marketing costs.

A good tax planning results from the following

About TAN

Established in the year 2013 in Kerala by Tax Professionals with an aim to provide personalized professional services to startups and Small Enterprises.We provide a complete suite of Taxation, Auditing & Assurance, Accounting, Advisory encompassing Planning, Compliance, Certification, and Representation.