What is income tax need features objective scope and importance of income tax?
Answers
Tax Planning is an activity conducted by the tax payer to reduce the tax liable upon him/her by making maximum use of all available deductions, allowances, exclusions, etc. feasible under law. In other words, it is the analysis of a financial situation from the taxation point of view. The objective behind tax planning is insurance of tax efficiency. Tax planning allows all elements of the financial plan to function in sync to deliver maximum tax efficiency.
Tax planning is critical for budgetary efficiency. A reduced tax liability and maximized the ability of retirement plans.
Types of Tax Planning
Short-range and long-range Tax Planning: The tax planning which is done annually to arrive at specific objectives is called short-range tax planning. Whereas, long-range tax planning does not include immediate pay-offs of any kind.
Permissive Tax Planning: Here the planning conforms to law provisions of tax.
Purposive Tax Planning: This is the tax planning method that is based on loopholes in the laws.
Tax planning is a term that stands for calculated application of tax laws, so as to effectively manage a person’s taxation. Leading to avail the tax benefits as per the law and in accordance with the interest of the nation and its people.