Difference between tax planning,tax avoidance and tax evasion

Difference between Tax planning,Tax avoidance and Tax evasion.




1)DEFINITION-Tax planning:

It is a way to reduce tax liability by taking full advantages

provided by the act through various exemptions,deductions,rebates

and relief.

Tax avoidance:

It is an exercise by which the assessee legally takes advantage of

the loopholes in the Act.

Tax evasion:

It is the illegal way to reduce tax liability by deliberately

suppressing income or sale or by increasing expenses etc.,which

results in reduction of total income of the assessee.



2)OBJECT- Tax planning:

To reduce tax liability by applying script and moral of law.

Tax avoidance:

To reduce the tax liability to the minimum by applying the script

of law only.

Tax evasion:

To reduce tax liability by applying unfair means.



3)BENEFIT- Tax planning:

Generally,arises in long run.

Tax avoidance:

Generally,arises in short run.

Tax evasion:

Generally,benefits do not arise but it causes penalty and

prosecution.



4)TREATMENT

OF LAW- Tax planning:

It uses benefits of the law.

Tax avoidance:

It uses loopholes in the law.

Tax evasion:

It overrules the law.



5)PRACTICE- Tax planning:

It is tax saving.

Tax avoidance:

It is tax hedging.

Tax evasion:

It is tax concealment.



6)NEED- Tax planning:

It is desirable.

Tax avoidance:

It is avoidable.

Tax evasion:

It is objectionable.



7)MORALITY- Tax planning:

It is moral in nature.

Tax avoidance:

It is immoral in nature.