synopsis

Evaluation of various tax saving alternatives of individuals

Sameer Krishna burli

11yacm5043

Sameer K Burli

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synopsis

Introduction:
Tax planning is the legal process of arranging your affairs to minimise a tax liability. There are more than 200 such provisions specifically written into tax law. Examples range from simply choosing a year-end date early in the tax year to maximise the period from earning profit to paying tax, to arrangements to shelter an appreciating asset from inheritance tax. Tax evasion is different, it is illegally reducing your tax, such as falsifying figures or not disclosing income. This carries serious penalties which can include a criminal prosecution. A problem arises when the law is unclear, so it is not obvious whether a tax planning scheme is within the law or not. For this reason, there have been three significant developments. 1. We have seen an ongoing approach to artificial tax avoidance which stands between avoidance and evasion. This was probably most accurately defined by a previous Paymaster General who said that: "Artificial avoidance schemes are those where they create economic distortions, provide commercial advantages over compliant taxpayers, redistribute tax revenues in an unfair or arbitrary manner, or represent an abuse that conflicts with or defeats the will of Parliament". These must be disclosed and are closely examined to see if they are legal. Even if they are, it is likely they will be closed in the next Finance Act, sometimes with retrospective effect. From April 2013 a General Anti Abuse Rule (GAAR) was enacted which enables HM Revenue & Customs to take action to counter any abusive avoidance activities without making specific legislation to close the schemes down individually. Where HM Revenue & Customs wish to challenge an arrangement under the GAAR the detail will be considered by a GAAR panel of tax professionals to advise whether the arrangements are abusive or not. Proper tax planning is a basic duty of every person which should be carried out religiously. Basically, there are three steps in tax planning exercise. They are as follows: 1. Calculate your taxable income under all heads i.e. Income from Salary, House Property, Business & Profession, Capital Gains and Income from other Sources. 2. Calculate tax payable on gross taxable income for whole financial year (i.e. from 1st April to 31st March) using a simple tax rate table.
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synopsis 3. After you have calculated the amount of your tax liability. You have two options to choose from:

A)Pay your taxes. B) Minimize the amount of tax you pay with prudent tax planning. Most people rightly choose Option 'B'. Here you have to compare the advantages of several tax saving schemes and depending upon your age, social liabilities, tax slabs and personal preferences, decide upon a right mix of investments, which shall reduce your tax liability to zero or the minimum possible. Every citizen has a fundamental right to avail all the tax incentives provided by the Government. Therefore, through prudent tax planning not only income-tax liability is reduced but also a better future is ensured due to compulsory savings in highly safe Government schemes. We sincerely advise all our readers and clients to plan their investments in such a way, that the post-tax yield is the highest possible keeping in view the basic parameters of safety and liquidity

Sameer K Burli

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Statement of problem:

To formulate a technique of usage of funds earned by working class people in order to reduce the tax burden to a considerable extent. For example an employee, may he be a govt. Employee or a private sector one, who is earning approx. 8,00,000 INR per annum, has to pay tax of 20% which amounts to INR 1,60,000.on top of it a surcharge of 3% is payable on the tax, so the total tax amounts to INR 1,64,800. This could be substantially reduced by tax planning.

Objectives:

1. Reduction of Tax liability. 2. Minimisation of litigation . 3. Productive investment . 4. Healthy growth of economy. 5. Economic stability. However objective of every individual may vary according to their own requirement.

Research methodology:

For any project, planning the research is the most important thing. For this purpose a step wise process is to be formulated. This helps in saving time and other resourses. Establish facts
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Sameer K Burli

synopsis Identify issues Evaluate facts Formulate a solution Develop conclusions Communicate results.

Sampling technique:

In this research work the samples will be specifically selected. The various samples selected in this project for the purpose of tax planning are: Salary statement of a1. 2. 3. 4. Government employee. IT professional. Bank employee. Business man.

Plan of analysis:
The salary statements that will be used in this research work will be analysed and payable tax will be evaluated before tax planning and later compared to the tax payable after tax planning. An before and after tax comparison table will be prepared to analyse and provide conclusions.

Sameer K Burli

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