Concepts of Tax Planning

The perceptions of tax payers and tax collector are different with respect to Taxes. The tax payer spares no efforts in minimizing his profits and attracting the least incidence. The tax-collector, on the other hand, tries to maximize revenue within the framework of law. It is here that the tax planning has assumed far-reaching importance in the confounded complexities of the taxation laws.

Methods commonly used by tax payers to minimize tax liability: 1. Tax Evasion 2. Tax avoidance 3. Tax Planning

Tax Evasion
Unscrupulous citizens evade their tax liability by dishonest means. Some of which are: 1. Concealment of Income 2. Inflation of expenses to suppress income 3. Falsification of accounts 4. Conscious violation of rules
These devises are unethical and have to be condemned. Evasion once proved not only attracts heavy penalties but may also lead to prosecution.

In India, Tax Evasion Is a National Sport

By Tushar Dhara and Cherian Thomas, July 28, 2011
As Rama Murthy completes the sale of his apartment in the Indian city of Hyderabad, he accepts from the buyer a bag full of rupees—part of the purchase price the tax man will never see. “Almost 40 percent of the sale price I got in hard cash,” says Murthy, 39, who works at a software company. “It’s illegal, but it’s rampant in India to avoid paying tax.”
India loses 14 trillion rupees ($314 billion) from tax evasion annually, depriving it of funds for investment in roads, ports, and power, says Arun Kumar, author of The Black Economy in India. General government tax revenue is an estimated 18 percent of India’s $1.5 trillion in gross domestic product, the lowest among the four BRIC nations, International Monetary Fund data show. With so little revenue coming in, Prime Minister Manmohan Singh is now attempting India’s biggest overhaul of the tax code in half a