Question

Difference between tax planning and tax evasion with comparison

Answer 1

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.

Answer 2

Tax planning is an act of the government trying to estimate its tax sources, the amount of money it could collect from the tax revenue authorities and what the tax money will do for the country's development, while tax evasion is an act of individuals or organizations boycotting payment of tax through operating with unregistered business or corruption means