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Tax Planning and Advisory
Tax planning is one of the key elements of financial. It helps in analyzing financial situation based on tax efficiency for investment and optimum utilization of resources. Tax planning means reduction of tax liability by the way of exemptions, deductions and benefits. All elements of the financial plan fall in place in the most efficient manner by having and effective tax planning. It helps in channelization of taxable income to different investment avenues thus relieving the individual of tax liability. The investment amount post lock-in, if any can be utilized for fulfilling needs and act as the retirement corpus in most cases. All in all, the objective of tax planning is to reduce tax liability and attain economic stability.
Short Term Tax Planning
This refers to the planning and thoughts put in at the end of the financial year with intent to reduce Taxable Income in a Legal way e.g. An individual comes across a situation the tax payable on his current year’s income is too high comparison to last year’s income and he intends to reduce it. In such a situation we help advising on the benefit of the tax rebates can be availed by him within the ambit of Income Tax Act. We focus on advising in arrangements that provide substantial tax savings without any long term commitment.
Long Term Tax Planning
This refers to the planning done at the beginning of a fiscal year. We work with Individuals in deciding on this plan and the actions are taken continuously during the year. Basically we can say a plan is chalked out at the beginning of year which is to be followed round the year. This type of planning does not help immediately as in the case of short range planning but helps in the long run. We work with Individuals to plan their investments during the year on the basis of their projected Income. This helps in optimization of deductions and rebates on the incomes thereby reducing the income tax implications. This help in avoiding the rush during the end of the financial year and sufficient liquidity can be arranged to during the year to do the necessary investments as planned.
Permissive Tax Planning
Permissive Tax Planning means making plans which are permissible under different provisions of the Income Tax law, such as planning of earning income covered by Sec.10, especially by Sec. 10(1) i.e. agricultural income earned by the taxpayer in India is exempt from tax. Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income. We work with Individuals to take of different incentives and deductions, planning for availing different tax concessions etc.
Purposive Tax Planning
This refers to plans made with a specific purpose to ensure the availability of maximum benefits through correct selection of investment, making suitable program for replacement of assets, varying the residential status and diversifying business activities and income etc. We help Individuals and Entrepreneurs by working with them on maintaining their current income flow and planning their future growth plans e.g. scale up, diversification etc. and recommend course of action that is taken to ensure the same.
Objectives of Tax Planning
The intent of the government always is to maximize tax collections and it comes up with legal ways to ensure that we pay the maximum tax possible. But there are ways to save money by remaining ethical and within legal boundaries. Doing so requires, finding a breaking route between the probable transactions and the analyzed tax applicable. This will help taking advantage of available provisions such as exemptions, deductions; rebates, etc. help in saving taxes while conforming the tax obligations.
Funds earned from taxable sources are to be channelized to income generating plans as per Income Tax Act, 1961. This productive investment planning results in higher returns and reduces tax liability.
Many individuals tend to get into litigations by resorting to reduce taxes through means that are not permissible by the Income Tax Act, 1961 e.g. tax evasion and tax avoidance. Tax evasion and tax avoidance are different and discussed below.
Tax Evasion is not legal. It is a means to minimize tax liability through fraudulent techniques like deliberate under-statement of taxable income or inflating expenses. It is an unlawful attempt to reduce one’s tax burden. The motive of a tax evader is to declare fewer profits to avoid tax liability. It involves illegal practices e.g. making false statements, falsifying documents, not maintaining complete records of the transactions, concealment of income, availing excess tax credit, claiming personal expenses as business expenses and so on. Tax evasion is a crime and if found guilty could lead to punishment under the law.
Tax avoidance as compared to tax evasion is a legal means to minimize tax liability. Even though tax avoidance means are legal, resorting to the same for reducing tax liability is not advisable because it is an activity of taking unfair advantage of the shortcomings in the tax rules by finding routes to avoid payment of taxes that are within the boundaries of law. An example of is adjusting accounts in way where there are no violation of tax rules. Tax avoidance carries the risk of being bracketed in the category of crime.
The taxes paid by us play a vital role in the country’s economic stability. The taxes are invested various infrastructure projects and welfare schemes for the benefit of the citizens of the country. Timely payment of taxes also ensures timely circulation of money in the market thus benefitting individuals and businesses to grow with the economy of the India.
Tax planning is the process of analyzing a financial plan or a situation from a tax perspective. Our objective of tax planning is to make sure there is tax efficiency. Through tax planning, we ensure that all elements of the financial plan function together with maximum tax-efficiency. Since tax planning is a significant component of a financial plan we guide in reducing tax liability and increasing the ability to make contributions towards retirement plans which are critical for success.
While tax planning we take into account various considerations such as size, the timing of income, timing of purchases and planning other kinds of expenditures etc. The Non Core activities e.g. Taxation (both Direct & Indirect) and Statutory Compliances e.g. computation of taxes, filing of periodical returns (TDS, VAT, Service Tax, etc.) are packaged to be outsourced to us. This help Entrepreneurs and Business houses in effective channeling of energies towards the core activities such as business development, product innovation & execution, without any worry and haunt of meeting deadlines of taxation filings & Statutory Compliances.
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