Tax planning in simple words is financial planning for tax efficiency. It aims to reduce one’s tax liabilities and optimally utilize tax exemptions, tax deductions, and benefits as much as possible within the framework of applicable laws. Tax planning includes making financial decisions to minimise the incidence of tax. This helps in legitimately availing the maximum benefit by using all provisions under tax laws. It enables one to think of their finances and taxes at the beginning of the financial year, instead of leaving it for the last minute.
There are two income tax regimes and many tax saving options available in India for taxpayers, and taxpayers can avail them as per eligibility. These options provide a variety of exemptions and deductions that help to reduce the overall tax burden. Employing unscrupulous methods to avoid paying taxes is prohibited, and one is liable to face the scrutiny & resultant action.