taxation project sem v

7/23/2019 Taxation Project Sem V

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TAX PLANNING TECHNIQUES AND TAX

MANAGEMENT

SUBMITTED TO : Ms.RAJASREE VARMA

FACULTY: PRINCIPLE OF TAXATION

SUBMITTED BY : SARA PARVEEN

SEMESTER V

ROLL NO. 130

HIDAYATULLAH NATIONAL LAW UNIVERSITY

RAIPUR

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TABLE OF CONTENTS

1. Acknowledgements .3

2. Introduction..43. Research Methodology.5

4. O!ecti"es..5

5. #a$ %lanning..&&. 'hat Is In"ol"ed In Income #a$ %lanning And (i))erent #a$ %lanning *tratergies1+

,. (i))erent As-ect O) (irect #a$ %lanning...13

. #a$ Management.15

/. O!ecti"e o) #a$ Management....1&1+. Im-ortance O) #a$ Management 0or or-orate %hiloso-hy..1&

11. (i))erence etween #a$ %lanning and #a$ Management....1,

12. onclusion....1/13. iliogra-hy..21

AC!NOWLEDGEMENTS

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At the outset I would like to e$-ress my heart)elt gratitude and thank my teacher Ms. Ra!asree

arma )or -utting her trust in me and gi"ing me a -ro!ect to-ic such as this and )or ha"ing the

)aith in me to deli"er. Maam thank you )or an o--ortunity to hel- me to grow.

My gratitude also goes out to the sta)) and administration o) 6789 )or the in)rastructure in the

)orm o) our lirary and I# 8a that was a source o) great hel- )or the com-letion o) this -ro!ect.

S"#" P"#$%%&

S%'%s(%# V

INTRODUCTION

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T)% I&*+'%,("- A*( 1/1is the charging *tatute o) Income #a$ in India.It -ro"ides )or le"y

administration collection and reco"ery o) Income #a$. Recently the :o"ernment o) Indiahas rought out

a dra)t statute called the ;(irect #a$es ode; intended to re-lace the Income #a$ Act1/&1 and the 'ealth

#a$Act 1/5&. %ulic ommentary has een called )or the (ra)t il.?a= is

recei"ed or is deemed to e recei"ed in India in such year y or on ehal) o) such -erson @

or?= accrues or arises or is deemed to accrue or arise to him in India during such year @

or?c= accrues or arises to him outside India during such year %ro"ided that in the case o)

a -erson not ordinarily resident in India within the meaning o) suBsection ?&= o) section

& the income which accrues or arises to him outside India shall not e so included unless

it is deri"ed )rom a usiness controlled in or a -ro)ession set u- in India.?2= *u!ect to a

the -ro"isions o) this Act the total income o) any -re"ious year o) a -erson who is a nonB

resident includes all income )rom whate"er source deri"ed which>?a= is recei"ed or is

deemed to e recei"ed in India in such year y or on ehal) o) such -erson @ or?= accrues

or arises or is deemed to accrue or arise to him in India during such year. C$-lanation 1.

>Income accruing or arising outside India shall not e deemed to e recei"ed in India

within the meaning o) this section y reason only o) the )act that it is taken into account

in a alance sheet -re-ared in India.

2.>0or the remo"al o) douts it is herey declared that income which has een included

in the total income o) a -erson on the asis that it has accrued or arisen or is deemed to

ha"e accrued or arisen to him shall not again e so included on the asis that it is recei"ed

or deemed to e recei"ed y him In.1

1 http://en.wikipedia.org/wiki/The_Income-tax_Act,_1961

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http://en.wikipedia.org/wiki/Income_tax_in_Indiahttp://en.wikipedia.org/wiki/Income_tax_in_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Wealth_Taxhttp://en.wikipedia.org/wiki/Wealth_Taxhttp://en.wikipedia.org/wiki/Wealth_Taxhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Wealth_Taxhttp://en.wikipedia.org/wiki/Wealth_Taxhttp://en.wikipedia.org/wiki/Income_tax_in_India


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RESEARCH METHODOLOGY

#his -ro!ect re-ort is an analytical and descri-ti"e study on InDuiry In"estigation and #rial.

*econdary sources ha"e een re)erred to and electronic sources ha"e een used at large to

gather in)ormation aout the to-ic.

ooks and other re)erences as guided y the )aculty o) riminal 8aw ha"e een use)ul in

gi"ing this -ro!ect its asic structure and details. 'esites article and dictionaries ha"e also

een used.

0ootnotes ha"e een -ro"ided where"er needed to acknowledge the source o) in)ormation.

OBJECTIVES

#o study in rie) what is ta$ -lanning and its related techniDues.

#o study aout ta$ management and the di))erence etween ta$ management and ta$

-lanning.

#o study aout the im-ortance o) ta$ -lanning and ta$ management.

TAX PLANNING

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#here is nothing which hurts more than -ayment o) ta$es. One Duestion that goes through e"ery

ta$ -ayers mind is Ehow can I reduce my ta$ liailityFG Reducing ta$ liaility is not always a

ad or illegal e$ercise.

#a$ -lanning can e de)ined as an arrangement o) ones )inancial and usiness a))airs y taking

legitimately in )ull ene)it o) all deductions e$em-tions allowances and reates so that ta$

liaility reduces to minimum. ta$ %lanning in"ol"es -lanning in order to a"ail all e$em-tions

deductions and reates -ro"ided in Act. #he Income #a$ law itsel) -ro"ides )or "arious methods

)or #a$ %lanning :enerally it is -ro"ided under e$em-tions uHs 1+ deductions uHs + to +9

and reates and relie)s. *ome o) the -ro"isions are enumerated elow

In"estment in securities -ro"ided uHs 1+?15= . Interest on such securities is )ully e$em-t )rom ta$.

C$em-tions uHs 1+A 1+ and 1+A

Residential *tatus o) the -erson

hoice o) accounting system

hoice o) organiation.

0or a"ailing ene)its one should resort to ona)ide means y com-lying with the -ro"isions o)

law in letter and in s-irit.

'here a -erson uys machinery instead o) hiring it he is a"ailing the ene)it o) de-reciation. I)

is his e$clusi"e right either to uy or lease it . In the same manner to choice the )orms o)

organiation ca-ital structure uy or make -roducts are the assesses e$clusi"e right. One may

look )or "arious ta$ incenti"es in the ao"e said transactions -ro"ided in this Act )or reduction

o) ta$ liaility. All this transaction in"ol"es ta$ -lanning.

#a$ %lanning is resorted to ma$imie the cash in)low and minimie the cash out)low. *ince #a$

is kind o) cast the reduction o) cost shall increase the -ro)itaility. C"ery -rudence -erson to

ma$imie the Return shall increase the -ro)its y resorting to a tool known as a #a$ %lanning.

#a$ %lanning should e done y kee-ing in mine )ollowing )actors

#he %lanning should e done e)ore the accrual o) income. Any -lanning done a)ter the accrual

income is known as A--lication o) Income an it may lead to a conclusion o) that there is a

)raud.#a$ %lanning should e resorted at the source o) income.

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#he hoice o) an organiation i.e. #a$ale Cntity. usiness may e done through a

%ro-rietorshi- concern or 0irm or through a om-any.

#he choice o) location o) usiness undertaking or di"ision also -lay a "ery im-ortant role.

Residential *tatus o) a -erson. #here)ore a -erson should arranged his stay in India such a way

that he is treated as 7R in India.

hoice to uy or 8ease the Assets. 'here the assets are ought de-reciation is allowed and

when asset is leased lease rental is allowed as deduction.

a-ital *tructure decision also -lays a ma!or role. Mi$ture o) det and eDuity )und should e

alanced to ma$imie the return on ca-ital and minimie the ta$ liaility. Interest on det is

allowed as deduction whereas di"idend on eDuity )und is not allowed as deduction

#he entral :o"ernment has een em-owered y Cntry 2 o) the 9nion 8ist o) *chedule II o)

the onstitution o) India to le"y ta$ on all income other than agricultural income ?su!ect to

*ection 1+?1==.J1< #he Income #a$ 8aw com-rises #he Income #a$ Act 1/&1 Income #a$ Rules

1/&2 7oti)ications and irculars issued y entral oard o) (irect #a$es ?(#= Annual

0inance Acts and Kudicial -ronouncements y *u-reme ourt and 6igh ourts.

V"#+s '%()+2s + T"- P4"&&&5 '"6 7% *4"ss%2 "s +44+8s :

1. S)+#( T%#' T"- P4"&&&5 *hort range #a$ %lanning means the -lanning thought o) and

e$ecuted at the end o) the income year to reduce ta$ale income in a legal way. C$am-le

*u--ose at the end o) the income year an assesse )inds his ta$es ha"e een too high in

com-arison with last year and he intends to reduce it. 7ow he may do that to a great e$tent y

making -ro-er arrangements to get the ma$imum ta$ reate uHs . *uch -lan does not in"ol"e

any long term commitment yet it results in sustantial sa"ings in ta$.

2. L+&5 T%#' T"- P4"&&&5 8ong range ta$ -lanning means a -lan chalked out at the

eginning or the income year to e )ollowed around the year. #his ty-e o) -lanning does not hel-

immediately as in the case o) short range -lanning ut is likely to hel- in the long run @e.g. I) an

assesse trans)erred shares held y him to his minor son or s-ouse though the income )rom such

trans)erred shares will e clued with his income uHs &4 yet is the income is in"ested y the son

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or s-ouse then the income )rom such in"estment will e treated as income o) the son or s-ouse.

Moreo"er i) the com-any issue any onus shards )or the shares trans)erred that will also e

treated as income in the hands o) the son or s-ouse.

3. P%#'ss$% T"- P4"&&&5 %ermissi"e #a$ %lanning means making -lans which are

-ermissile under di))erent -ro"isions o) the law such as -lanning o) earning income co"ered

y *ec.1+ s-ecially y *ec. 1+?1= %lanning o) taking ad"antage o) di))erent incenti"es and

deductions -lanning )or a"ailing di))erent ta$ concessions etc.

4. P#9+s$% T"- P4"&&&5 It means making -lans with s-eci)ic -ur-ose to ensure the

a"ailaility o) ma$imum ene)its to the assesse through correct selection o) in"estment making

suitale -rogramme )or re-lacement o) assets "arying the residential status and di"ersi)ying

usiness acti"ities and income etc.2#he go"ernment o) India im-oses an income ta$ on ta$ale

income o) all -ersons including indi"iduals 6indu 9ndi"ided 0amilies ?690s= com-anies

)irms association o) -ersons ody o) indi"iduals local authority and any other arti)icial !udicial

-erson. 8e"y o) ta$ is se-arate on each o) the -ersons. #he le"y is go"erned y the Indian

Income #a$ Act 1/&1. #he Indian Income #a$ (e-artment is go"erned y (# and is -art o)

the (e-artment o) Re"enue under the Ministry o) 0inance :o"t. o) India. Income ta$ is a key

source o) )unds that the go"ernment uses to )und its acti"ities and ser"e the -ulic. #he Income

#a$ (e-artment is the iggest re"enue moilier )or the :o"ernment. #he total ta$ re"enues o)

the entral :o"ernment increased )rom 13/2.2& illion in 1//,B/ to 5/.+/ illion in

2++,B+. #here are legitimate ways to reduce ta$es through -ro-er ta$ -lanning and such

methods are always encouraged. ut un)ortunately there is also a tendency to reduce ta$ through

illegal methods. #hey are not acce-ted -ractice and can in"ite -rolems.

T)% '"& +7%*($%s & "&6 %-%#*s% +& ("- 94"&&&5 "#% (+ :;

1. A"ail all concessions and relie)s and reates -ermissile under the Act.

http://incometaxmanagement.com/Page!/Tax-"anagement-Proced#re/$-1-

"eaning-o%-Tax-P&anning.htm&

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2. Arrange the a))airs in a commercial way to minimie the incidence o) ta$.

3. laim ma$imum relie) where ta$es are -aid in more than one country.

4. ecome ta$ com-liant and a"oid -enalties -rosecutions and interest -ayments.

5. 0ruit)ul in"estment o) sa"ings.

&. #imely com-liance o) -rocedural reDuirements like ta$ audit #(* #* etc.

,. A--ro-riate record kee-ing

. A"oidance o) litigation.

/. :rowth o) economy and its staility.

1+. %ay ta$es L not a -enny more not a -enny less.3

' http://incometaxmanagement.com/Page!/Tax-"anagement-Proced#re/$-1-

"eaning-o%-Tax-P&anning.htm&

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WHAT IS INVOLVED IN INCOME TAX PLANNING AND

DIFFERENT TAX PLANNING STRATERGIES

Income ta$ -lanning are the strategies that an indi"idual or usiness de"ises to minimie ta$

-ayments. It in"ol"es de"ising and -utting a -lan in -lace on minimiing ta$ -ayments. #he

other -art in"ol"ed in income ta$ -lanning is ta$ management which is essentially the

im-lementation o) the income ta$ -lanning strategies.

#here are two -rimary strategies in"ol"ed with income ta$ -lanning. #he )irst strategy is to

minimie the income ta$ liaility o) the indi"idual or the usiness. #he second -rimary strategy

is to -lan out and )ul)ill )inancial goals without increasing the ta$ liaility o) the -eo-le or

usiness in"ol"ed in the income ta$ -lanning -rocess.

In order to reach the goals set in the income ta$ -lanning strategies there are three -rimary ste-s

that indi"iduals and usinesses ha"e to take. #he )irst ste- is to -lan the strategy so that the

indi"idual or usiness -ays the least amount o) ta$es on the transaction as -ossile.

0or e$am-le in determining which retirement sa"ings account is the est one )or the indi"idual

or the em-loyees o) the com-any the -ersonal )inancial situation o) each -erson should e

considered. An indi"idual retirement -lan ?IRA= may meet the )inancial goals o) some

indi"iduals ut it may take a Roth IRA to meet the goals o) other ty-es o) indi"iduals. %art o)

income ta$ -lanning is determining which ty-es o) actions accounts and transactions -ro"ide the

est ta$ outcome.

Income ta$ -lanning not only in"ol"es reducing the ta$ liaility on income ut it also reDuires

the indi"idual or the usiness to de)er income. 'hen the indi"idual determines the est ways to

de)er income they are also )iguring out the est ways to de)er the ta$ liaility o) their actions as

well. 0or e$am-le a )inancial ad"isor may tell an indi"idual to take a ca-ital gain y selling an

in"estment to use as this as a ta$ ad"antage in a -articular year.

0inally ta$ -lanning in"ol"es determining the deductions that are -ermitted under the law.

Indi"iduals and usinesses should look )or ways to ma$imie the ta$ deductions they can take.

Indi"iduals and usinesses should also look )or the ma$imum numer o) ways -ossile to take

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deductions. #he more legal deductions an indi"idual or usiness can take the lower the ta$ale

income is and the lower the ta$ oligation is which is the ultimate goal o) income ta$ -lanning.4

DIFFERENT TYPES OF TAX PLANNING STATEGIES

#he goal o) all ta$ -lanning strategies is to minimie an indi"iduals or usiness total ta$

liaility )or the year while also meeting -ersonal or usiness )inancial goals. In order to achie"e

these goals com-rehensi"e research and e$acting record kee-ing are essential elements o) all

ty-es o) success)ul -lanning strategies. An indi"idual may not need to use e"ery ty-e o) ta$

strategy ut ha"ing a road knowledge o) ta$ issues will assure that he minimies his ta$

liaility and -re-ares an accurate return. 'hether it is taking ad"antage o) current educationB

related ta$ credits or understanding the intricacies o) de-reciation each strategy relies on

thorough research and meticulous recordkee-ing.

In"estigating all as-ects o) income ta$es > concentrating on the areas that -ertain to the

indi"iduals )inancial situation > is the most im-ortant ta$ -lanning strategy. Many credits

deductions and limits on retirement or health sa"ings accounts contriutions change )rom year to

year. #a$-ayers o)ten remain unaware o) these changes and miss o--ortunities that they would

Duali)y )or. #he most accurate and u-dated in)ormation can e accessed through the )ederal state

or local ta$ entity. 0or citiens o) the 9nited *tates the Internal Re"enue *er"ice ?IR*= o))ers an

e$tensi"e collection o) -ulications co"ering e"ery area o) indi"idual and usiness ta$es.

'hether using a ta$ -ro)essional accountant or sel)B-re-aring the return im-lementing ta$

-lanning strategies and maintaining records throughout the year -ro"ides the indi"idual or

usiness with the necessary tools to minimie ta$ liaility. #his second im-ortant ta$ -lanning

strategy allows the indi"idual or usiness to accurately track their -rogress on their goals through

-recise record kee-ing. It also assures nothing is missed when it is time to -re-are the ta$ return.

*-readsheets and )inancial so)tware are ta$B-lanning tools that hel- organie in)ormation. #he

so)tware e$-ense may e ta$ deductile.

Although the )irst two ta$ -lanning strategies a--ly to e"eryone others are a--licale de-ending

on the indi"iduals )inancial situation. Making sure that -reBta$ contriutions to retirement and

( http://www.wi!egeek.com/what-i!-in)o&)ed-in-income-tax-p&anning.htm

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health sa"ings accounts are ma$imied and done within the allowed time s-an may hel- lower

any ta$ liaility. 6omeowners should use strategies that take ad"antage o) any credits a"ailale

)or e$-enses related to their residences. 0or e$am-le -ro-erty ta$es and interest on mortgages

are usually deductile e$-enses. *-ecial ta$ credits may e tem-orarily a"ailale )or

im-ro"ements that increase the energy e))iciency o) the home so taking ad"antage o) these can

also reduce ta$ liaility.

ollege students their )amilies and anyone taking coursework should e aware o) changes to the

credits and deductions a"ailale )or educationBrelated e$-enses. #he treatment o) in"estment

income and losses may change too so indi"iduals might make ad"antageous ad!ustments ased

on current rules. Other ta$ -lanning strategies in"ol"e medical e$-enses charitale contriutions

and ad!ustments to ta$ withholding amounts. Many -eo-le are unaware that deductions can e

taken u- to the amount o) any earnings related to a hoy. In the same manner gamling losses

can e deducted u- to the amount o) gamling winnings.5

$ http://www.wi!egeek.com/what-are-the-di*erent-t+pe!-o%-tax-p&anning-

!trategie!.htm

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DIFFERENT ASPECT OF DIRECT TAX PLANNING

#he -ro"isions o) the IncomeB#a$ are contained in the IncomeB#a$ Act 1/&1 ?the Act= which

e$tends to whole o) India and is o-erati"e )rom the 1st day o) A-ril 1/&2?the Rules=. #he Act

-ro"ides )or determination o) ta$ale income ta$ liaility -rocedures )or assessment a--eals

-enalties interest le"ies the ta$ -ayment schedules and its determination re)unds and

-rosecutions. (e-ending u-on :o"ernment -olices certain income is e$em-ted )rom ta$ )or

e$am-le *C ?*-ecial Cconomic one= units income Agriculture income etc. and deduction are

also -ro"ided on )ul)illment o) -rescried criteria. %ro"isions relating to such e$em-tions and

deduction are also contained in the Act. or-orate )orm o) usiness is much in "ogue. #here)ore

certain ta$es s-eci)ic to com-anies like #a$ on ook -ro)it ?115K= ta$ on (i"idend (istriuted

?115O= are le"ied. At times in ross order transactions income earned get e$-osed to ta$ in

India as well as in some other countries. %ro"isions )or u-holding relie) )rom doule ta$ation are

also made in the Income #a$ Act.

#he Act also lays down the -owers duties o) "arious incomeBta$ authorities. eing re"enue

legislation the act is amended once a year through union udgets and the )inance ill is normally

-resented to the %arliament )or a--ro"al around 0eruary. #he Act has em-owered the entral

oard o) (irect #a$es ?(#= to )rame the rules and these rules are im-lemented a)ter

necessary :aette noti)ications. #he (# also issues circulars and clari)ications )rom time to

time )or im-lementation y the incomeBta$ authorities y "irtue o) section 11/ which gi"es such

rule making -owers to the (#. It is im-racticale )or the Act to -ro"ide e$hausti"ely )or

e"erything relating to limits conditions -rocedures )orms and "arious other as-ects. #here)ore

this -ower has een delegated to (# and thus -eriodical changes and modi)ication y an

e$ecuti"e authority is )acilitated. #he -ower to )rame rules is "ested with the oard uHs 2/5 o)

the Act and the word N-rescried used in section 2?33= means what is -rescried y rules made

under the Act. #he IncomeB#a$ Act gi"es de)initions o) the "arious terms e$-ressions used in the

Act. 9nless the conte$t otherwise reDuires these de)inition should e a--lied. #he words

Nmeans Nincludes and Nmeans and includes are used in these de)initions and the signi)icance o)

these terms needs to e understood. 'hen a de)inition uses the word Nmeans the de)inition is

sel)Be$-lanatory restricti"e and in a sense e$hausti"e. It im-lies that the term or e$-ression so

de)ined means only as to what is de)ines as and nothing else. 0or e$am-le the terms Nagricultural

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income Nassessment year Nca-ital asset are e$hausti"ely de)ined. 'hen the legislature wants to

widen the sco-e o) a term or e$-ression and where an e$hausti"e de)inition cannot e -ro"ided

it uses the word Nincludes in the de)inition. :enerally an inclusi"e de)inition -ro"ides an

illustrati"e meaning and the de)inition could include what is not s-eci)ically mentioned in the

de)inition so long as the sti-ulated criteria are satis)ied. #o illustrate re)er to the de)initions o)

Nincome N-erson Ntrans)er in the Act. 'hen the legislature intends to de)ine a term or

e$-ression to mean something and also intends to s-eci)y certain items to e included other the

words N means as well as N includes are used. *uch de)inition is not only e$hausti"e ut also

illustrati"e in s-eci)ying what is intended to e included. *ometimes s-eci)ic items are included

in an e$hausti"e de)inition in order to a"oid amiguity and to -ro"ide clarity. %lease re)er to

de)initions o) Nassesse NIndian com-any Nrecognied -ro"ident )und under the Act. 0urther

any decision gi"en y the *u-reme ourt also ecomes a law on the su!ect and will e inding

on all the courts triunals incomeBta$ authorities as well as the ta$-ayers. In case o) a--arent

contradictions in the *u-reme ourt rulings the )ollowing rules may ha"e to e )ollowedB

1. #he decision o) the larger ench would -re"ail.

2. #he -rinci-le o) the later decision shall -re"ail where the decisions are y eDual numer i)

!udges.

(ecisions gi"en y 6igh ourts are inding on all ta$-ayers and It authorities which )all under

its !urisdiction till it is o"erruled y higher authority.

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TAX MANAGEMENT

%lanning which leads to )iling o) "arious returns on time com-liance o) the a--licale

-ro"isions o) law and a"oiding o) le"y o) interest and -enalties can e termed as e))icient ta$

management. In short it is an e$ercise y which de)aults are a"oided and legal com-liance is

secured. #hrough -ro-er ta$ -lanning and management the -enalty o) u-to 1+++++ )or delay in

)urnishing o) ta$ audit re-orts uHs 44A can e a"oided.

*imilarly y a--lying )or %ermanent Account 7umer ?%A7= the -enalty under the Act can e

a"oided. #he orrowal o) loan otherwise than y way o) an account -ayee cheDue or ank dra)t

attracts 1++P -enalty and this can e a"oided y conscious -lanning o) the e$ecution o) loan

transactions. %lanning is a -erce-tion concei"ed on legitimate grounds and achie"ed through

genuine transactions within the )ramework o) law e.g. contriution to %ulic %ro"ident 0und and

claiming reate uHs o) the Act. #he )iling o) the returns with all -ro-er documentary e"idence

)or the "arious claims reates relie)s deductions income com-utations and ta$ liaility

calculations would also e termed as ta$ management. Assessee is e$-osed to certain un-leasant

conseDuences i) oligations cast under the ta$ laws are not duly discharged. *uch conseDuences

take sha-e o) le"y o) interest -enalty -rosecution )or)eiture o) certain rightsetc.#here)ore any

e))ort in ta$ -lanning is incom-lete unless -ro-er discharge o) res-onsiilities is not made.

T"- '"&"5%'%&( &*42%s

om-iling and -reser"ing data and su--orting documents e"idencing transactions claims etc.

making timely -ayment o) ta$es e.g. ad"ance ta$ sel) assessment ta$ etc. #(* and #*

com-liance )ollowing -rocedural reDuirements e.g. -ayment o) e$-enses or acce-tance o) loans

or re-ayment thereo) o"er 2++++ y account -ayee ank cheDue or ank dra)t etc.

com-liance with the -rescried reDuirements like ta$ audit certi)ication o) international

transactionsetc. timely )iling o) returns statements etc res-onding to notices recei"ed )romthe authorities. -reser"ing record )or the -rescried numer o) years mentioning %A7 #A7

etc. at a--ro-riate -laces. res-onding to reDuests )or alance con)irmation )rom the other

assessees.

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OBJECTIVES OF TAX MANAGEMENT

#he declared o!ecti"e o) medium term and long term ta$ -lanning and o-timiation is to make

signi)icantcontriution to the com-anys success and su--ort "alue oriented cor-orate manageme

nt. #his can e achie"ed only i) the com-onent ?"alue dri"er= ta$es is managed -roBacti"ely. #he

aim is to determine a grou- ta$ rate that is as o-timal as -ossile and to -lan realie and )inally

to maintain in the long term all measures necessary to achie"e this target. #he latter entails as

already mentioned increased e))orts ecause it is ecoming e"er more di))icult to recognise

sco-e )or ta$ creati"ity and at the same time to retain room )or )le$iility. In addition to -lanning

ta$ costs in indi"idual locations ?countries regions e.g. cantons= and the grou-s o"erall ta$

urden ultimately the ta$ urden o) e"ery single shareholder must e o-timied.

IMPORTANCE OF TAX MANAGEMENT FOR CORPORATE

PHILOSOPHY

In the conte$t o) cor-orate acti"ity rather little signi)icance continues to e attached to ta$

-lanning although it is one e"en i) not the most im-ortant com-onent o) strategic cor-orate

-lanning. #a$ -lanning means in this sense o-timiing not eliminating ta$es. A com-anys ta$

structure must e systematic and consistent in itsel). O) crucial signi)icance )or success is that the

ta$ structures are ke-t as sim-le as -ossile and are understood right u- to the )ront line&

6 http://www.!crid.com/doc/166'(/Tax-"anagement-a#ch&i

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DIFFERENCE BETWEEN TAX PLANNING AND TAX

MANAGEMENT

'hile ta$ -lanning and ta$ management correlate with each other the two as-ects o) ta$es ha"e

se"eral di))erences. #he -rimary di))erence etween ta$ -lanning and ta$ management is the time

)rame in which each -art is conducted. #he ta$ -lanning takes -lace ahead o) time while the ta$

management is the im-lementation o) the -lan.

#he )irst -rimary di))erence etween ta$ -lanning and ta$ management is the reDuirements.

'hile ta$ -lanning is not a reDuirement )or either a usiness or indi"idual ta$ management is a

reDuirement. C"ery indi"idual and usiness in the 9nited *tates is reDuired to manage ta$es

which includes )iling the a--ro-riate state and )ederal ta$ returns.

#he second -rimary di))erence etween ta$ -lanning and ta$ management is aout ta$ liaility.

'hen a usiness or indi"idual goes through the ta$ -lanning -rocess they are trying to minimie

the ta$ liaility o) the entity y -lanning deductions -urchases and e$-enses ahead o) time. #a$

management howe"er in"ol"es making sure that when the ta$ -lan is im-lemented that it is

according to the ta$ laws and regulations.,

#he third di))erence etween ta$ -lanning and ta$ management -ertains to liailities. #a$

-lanning in"ol"es taking the actions necessary to minimie the ta$ liailities o) the usiness or

the indi"iduals. #a$ management on the other hand is aout a"oiding the -ayment o) interest or

)ees )or not aiding y the ta$ laws and regulations.

#he )ourth di))erence etween ta$ -lanning and ta$ management is the time )rame. #a$ -lanning

is an action that is taken in the -resent ut relates to the )uture. #a$ management on the other

hand encom-asses the -ast -resent and )uture. this includes tracking -ast sales deductions

assets and more making current ta$ -ayments and -re-aring ta$ documents )or any )uture

-ayments that must e made.

http://incometaxmanagement.com/Page!/Tax-"anagement-Proced#re/$-(-

0i*erence-etween-Tax-P&anning-And-Tax-"anagement.htm&

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18/21

'hile there are -lenty o) di))erences etween ta$ -lanning and ta$ management there is also one

-rimary similarity. #he -rimary similarity etween ta$ -lanning and ta$ management is that ta$

-lanning is a suset or a -art o) ta$ management. 'hen an indi"idual or usiness is in the

-rocess o) ta$ -lanning they are also taking into account all o) the as-ects o) ta$ management

including ta$ deductions -ro-er auditing o) the accounting )iles and records -utting together

and )iling the ta$ return documents on time and -lanning )or ta$ scenarios that may come u-

during that -articular ta$ year.

http://www.wi!egeek.com/what-i!-the-di*erence-etween-tax-p&anning-and-tax-

management.htm

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CONCLUSION

#a$ -lanning is an integral -iece o) a -ro-er )inancial -lan. #he )act is many -eo-le do

not concentrate on ta$ -lanning. I ha"e seen this truth in my -ractice through new clients who

o)ten tell me EMy ta$ guy ne"er talked to me aout how to lower my ta$ ill through ta$

-lanning.G Most )olks handle their ta$es in a reacti"e manner "ersus a -roacti"e a--roach. #hey

dum- their ta$ documents on the ta$ -re-arers desk and ho-e )or the est. #his is a reci-e )or

disaster.9nderstanding the im-act ta$es will ha"e on your )inancial wellBeing is essential

es-ecially )or those who are sel)Bem-loyed. #ake time to -lan )or the current year and make

ad!ustments to create -ositi"e momentum. #here are always new laws and changing -ro"isions

in the ta$ code which again illustrate the im-ortance o) -lanning. /

In the current usiness en"ironment ta$ -lanning has rele"ance )or all indi"iduals including the

-eo-le dealing in shares house -ro-erty salaried usiness owners and also income )rom other

sources.

'hy ta$ -lanning is necessary )or the salaried em-loyeesF #his Duestion is the headache o)

almost all indi"idual. %ro-er ta$ -lanning will hel- the salaried em-loyee to sa"e ta$ in order to

sa"e its hard earn money. It also hel-s the indi"idual to sa"e ta$ at the end o) the assessment year

i) they in"est in certain long term in"estments.

ut i) they do not do -ro-er ta$ -lanning ultimately end u- in -aying higher ta$. Qou can reduce

your ta$ liaility y arranging your )inancial incomes and in"estments in such a way as to en!oy

the ma$imum ta$ ene)its y making use o) all the ene)icial -ro"isions and ta$ incenti"es

which are incor-orated in the ta$ laws that entitle you to reates and concessions. Most o) the ta$

incenti"es oriented and not only sa"es your ta$ also oost the economy o) the country in the

long run.

9 http://)h2nancia&management.com/9/(/1/9

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20/21

#a$ -lanning is oth -er)ectly legal and encouraged y ta$ authorities. *o in the current usiness

en"ironment ta$ -lanning has rele"ance and -ro"ides -lacement o--ortunities such as

1. (irect ta$ -lanners

2. Indirect ta$ -lanners

3. #a$ -lanning consultants

4. #a$ation consultant

5. 0inancial -lanners

In the )ield o) )inance ta$ -lanning )orms -art o) the )inancial -lanning so it com-rises the most

o) the -art o) the indi"idual to understand the im-osition o) ta$ liaility in order to gi"e the

im-ortance o) ta$ in the )ield o) )inance.

1+

1 http://www.managementparadi!e.com/%or#m!/2nancia&-management-%m/1-

importance-tax-p&anning.htm&

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BIBLIOGRAPHY

http://www.wi!egeek.com/what-i!-the-di*erence-etween-tax-p&anning-and-

tax-management.htm

http://www.!crid.com/doc/166'(/Tax-"anagement-a#ch&i

http://www.wi!egeek.com/what-are-the-di*erent-t+pe!-o%-tax-p&anning-

!trategie!.htm

htt-HHwww.wisegeek.comHwhatBisBin"ol"edBinBincomeBta$B-lanning.htm

)((9:

taxation project sem v

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