Question

47. Which instrument saves tax? *
O a) Equity shares
O b) Debentures
O c) Retained earnings
O d) Preference shares​

Answer 1

a) Equity shares

Explanation:

• Instruments that save tax are only on specific investments such as five-year notified tax saving bank deposits.
• Other tax savers are life insurance, Public provident Fund, National Savings Certificate etc.
• Equity shares are one of the tax saving instruments.
• While investing in equity employes are offered equity compensation plans to save tax.

Answer 2

The instrument is Debenture

• It is one of the most frequent types of long-term loans employed by businesses.
• Debentures are normally repaid on a set date, however, some debentures are irredeemable assets.
• The corporation considers the interest paid to debt holders to be a cost.
• Before computing income tax, interest is subtracted from the overall income of the corporation. As a result, the enterprise's tax burden is reduced.