Tax Planning
“The end goal of tax planning is to keep more of what you make”
(Rod Khleif, Author)
(Rod Khleif, Author)
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.
NRI Tax Planning – Apart from the various provisions applicable to resident Indian taxpayers, foreign investment & taxation of NRIs are governed by the ITA (income tax act) & FEMA (foreign exchange management act). Under ITA, the tax residency status & tax applicability depends on the number of days an NRI spends in & outside India.
Tax planning is an important part of personal financial planning. Reduced tax liability leads to higher investible surplus. Correct tax planning helps achieve following
Reduced tax liability
Productive investment
Growth of economy
Litigation minimisation
Economic stability