Page 235 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes These disadvantages may justify a decision to forego direct exporting at the present time, although
your company may be able to pursue exporting through an intermediary. If your company’s
financial situation is weak, attempting to sell into foreign markets may be ill-timed. The decision

to export needs to be based on careful analysis and sound planning.
Self Assessment

State whether the following statements are true or false:
1. Managerial Decision-making depends on tax planning.
2. An individual make-or-buy decision cannot affect a company’s production methods,
working capital, and cost of borrowing or competitive position.

3. An entity’s non-financial assets can be acquired either through outright purchase or leasing
arrangements.

4. Export financing is often a key factor in an unsuccessful sale.
10.2 Tax Planning Regarding Employees Remuneration

Employee Remuneration refers to the reward or compensation given to the employees for their
work performances. Remuneration provides basic attraction to an employee to perform job
efficiently and effectively. Remuneration leads to employee motivation. A salary constitutes

an important source of income for employees and determines their standard of living. Salaries
affect the employees’ productivity and work performance. Thus the amount and method of
remuneration are very important for both management and employees.

For employees of large Indian and multinational companies, benefits go beyond salaries to

include lifestyle perks such as company accommodation or club membership. Growth in business
operations and competition for talent are now prompting even mid-sized companies to adopt the
HR practices of such large companies. However, with tax regulations constantly evolving, it is
not clear whether these perks are tax efficient or not. Certain perks such as company mediclaim,

which doesn’t qualify as a lifestyle perk, is a useful benefit offered to employees. Here is a look

at some company perks and how they benefi t you:
All income received as salary under Employer-Employee relationship is taxed under this head. If
the Income exceeds the minimum exemption limit the Employers must withhold tax compulsorily
as Tax Deducted at Source (TDS), to their employees, which shows the Details of tax deductions
and net paid income.

Tax planning for your Salary Cost to Company (CTC) the Components of Salary is divided into
DA, HRA, Conveyance Allowance, Variable Incentives etc. In order to get Maximum Tax Benefi ts,
the following provisions of income tax which are benefi cial to employee should be included in
the Salary CTC. Therefore tax planning is a process which is enables employers and employees

to evaluate their fi nancial profile with the objective of tax minimisation on their personal income

or business profits. It entails the structuring of salary, timing of income and purchase plans,
selection of best investment plan, the process and outlays in tax fi ling etc.
Example: Rajiv earns salary of ` 10, 00,000 per annum. He has purchased for his family
and himself a health Insurance policy costing ` 10,000. He also invested ` 30,000 in ELSS funds
and paid LIC premium for Insurance Policy for ` 70,000 and did charity of ` 10,000 to Prime

Minister Relief Fund. You can see his tax planning effects as reflected below in the table.

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