Direct taxes and corporate tax law & planning..

Definition of Tax Avoidance An arrangement made to beat the intent of the law by taking unfair advantage of the shortcomings in the tax rules is known as Tax Avoidance. It refers to finding out new methods or tools to avoid the payment of taxes which are within the limits of the law. This can be done by adjusting the accounts in a manner that it will not violate any tax rules as well as the tax incurrence will also be minimised. Formerly tax avoidance is considered as lawful, but now it comes to the category of crime in some special cases. The only purpose of tax avoidance is to postpone or shift or eliminate the tax liability. This can be done investing in government schemes and offers like the tax credit, tax privileges, deductions, exemptions, etc., which will result in the reduction in the tax liability without making any offence or breach of law. Definition of Tax Evasion An illegal act, made to escape from paying taxes is known as Tax Evasion. Such illegal practic...

                                 Every asses s ee wants to escape from paying taxes which encourages them to use various means to avoid such payment. And when its about savings if taxes, the two most common practices that can be seen all around the world are tax avoidance & tax evasion.  Comparison Chart BASIS FOR COMPARISON TAX AVOIDANCE TAX EVASION Meaning Minimization of tax liability, by taking such means which do not violate the tax rules, is Tax Avoidance. Reducing tax liability by using illegal ways is known as Tax Evasion. 2.What is it? Hedging of tax Concealment of tax 3.Attributes Immoral in nature, which involves bending the law without breaking it. Illegal and objectionable, both in script and moral. 4.Concept Taking unfair advantage of the shortcomings in the tax laws. Deliberate manipulations in accounts resulting in fraud. 5.Legal implication Use of Justified...

Shut down  / Continue Decision  :          Loss co-exists with profit in a business. A business may suffer loss due to one / more of the following reasons :  1. Fall in demand 2.financial problems 3. Change in technology 4. High rates of taxes 5. Miss management 1.  Fall in demand  :    The demand of the product may fall due to availability of new products in the market, change in fashion / increase in number of producers/ competitors. 2. Financial problems :   A firm may not have sufficient finance of its own nor further credit is available from banks/ financial institutions due to government restrictions. 3. Change in technology :   Where the growth of technology is rapid & if it is not possible to keep pace with it the net results may be a loss of profit. 4. High rates of taxes  :   High rate of taxes - import duty, excise , sales tax, octroi etc, increases the price of ...

                  When a business concern requires a product / any part/component of the product for its existing unit, it has to decide whether it should make the product, part, or component or buy it from other manufacturers. There are many costing and non costing considerations guiding the decision to make or buy it. some of the important factors affecting such decision are: 1. whether for manufacture infrastructural facilities are available 2. whether the present capacity of the undertaking is.  fully utilised. if not, it can be utilised in making the required product. 3. if an additional unit is required for manufacture the required product , the concern possesses adequate funds for establishing the unit and the whole production of the unit will be consumed by the concern or there is market for the sale of extra production 4.whether the product is available in the market easily and at reasonable terms 5. if the cost of manufacture ...

                                       UNIT  -  5  Tax planning with reference to specific managerial  decisions -     Own/ lease, Make or buy decisions, shut down / continue, 1)   Tax planning in respect of own or lease :        A lease of property is a transfer of the right to enjoy the such property, made at a certain time, in consideration of a price payable periodically to the transferor by the transferee.       In other words, leasing is an arrangement that provides a person with use & control over an asset, for a price payable periodically, without having a title of ownership. In the case of a lease agreement, the owner of the asset is called the lessor & the user is called the lessee.        When a person needs an asset for his business purpose, he has to decide whe...