Concept of Tax Planning

Dear Friends,

My this blog is related to tell you about the basic concept of Tax Planning. 

"Tax Planning is an art and science of evaluating the alternatives and picking the one maximizes the income, but not necessarily by minimizing the tax."

Tax Planning involves a study of the exemptions, rebates, deductions and reliefs given under the direct and indirect laws for specific business decisions in the case of business persons, and the personal finance decisions in the case of individuals in such a way that the tax amount as the percentage if his income is the least.

For instance, 

A company has the option of setting up its business in a backward area, which entitles it to enjoy certain direct and indirect tax benefits. But the downside of going to the backward area could be the higher cost of doing business. It is more important for the company to assess whether the tax benefit is greater than the additional cost or vice versa. This is the essence of Tax Planning.

Similarly in the case of Individuals, income tax law allows a person to reduce form his taxable income certain specific investment. The decision to do so will depend upon whether the net income earned from specified investment is higher than the income from another investment after deducting tax.

Objectives of Tax Planing:

• Reduction of Tax liability by utilizing the benefits available in the tax laws.

• Multi dimensional; Investment Decisions

• Informed & pragmatic financial decisions

• Discharging a citizen's duty

• Reducing pressure on the legal infrastructure

Factors to be considered in Tax Planning:

• Residential status and citizenship of the tax payers

• Heads of income to be included in computing net income

• The tax laws

I hope it will be helpful to you.

Thanks and Regards

Kulvinder Kaur

B.Com(H), MBA(Finance)

9871580806,8826566751

rightsteptoinvest@gmail.com