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Corporate Tax Planning

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Example: A skilled accountant can show a taxpayer where he or she can save on taxes,

and provide advice about conducting financial affairs in a way which will limit tax liability.
Accountants will usually not guarantee to reduce tax liability by a set amount or percentage, but

they do pride themselves on finding as many ways as possible to generate tax savings for their
clients.
Other tax avoidance strategies may be more aggressive. While still legal, they are sometimes
deemed ethically questionable, and taxpayers may skirt the line between legality and illegality.
Most accountants have personal limits when it comes to assisting people with tax avoidance, and
while they will provide advice and help with fully legal activities, they may be reluctant to be
involved in more gray areas. Aggressive tactics can include taking advantage of loopholes in the
law which may be subject to interpretation, and not all accountants interpret these loopholes in
the same way.

When people engage in tax avoidance, they are knowingly trying to reduce their taxes, but they
are not knowingly breaking the law. Tax evaders, on the other hand, are aware of the fact that the
means they are using are not legal, and they are choosing to engage in evasion activities despite
this. Evasion tactics vary by nation, but include hiding or moving income so that it cannot be
taxed even though it is legally taxable, or simply refusing to send in tax payments.

3.4.1 Double Taxation

Double taxation is the levying of tax by two or more jurisdictions on the same declared income

(in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the
case of sales taxes). This double liability is often mitigated by tax treaties between countries. Most
countries impose taxes on income earned or gains realised within that country regardless of the
country of residence of the person or firm. Most countries have entered into bilateral double

taxation treaties with many other countries to avoid taxing non-residents twice — once where
the income is earned and again in the country of residence. However, there are relatively few
double-taxation treaties with countries regarded as tax havens. To avoid tax, it is usually not
enough to simply move one’s assets to a tax haven. One must also personally move to a tax haven
to avoid tax.
India has comprehensive Double Taxation Avoidance Agreements (DTAA) with 84 countries.

This means that there are agreed rates of tax and jurisdiction on specified types of income arising
in a country to a tax resident of another country. Under the Income Tax Act 1961 of India, there
are two provisions, Section 90 and Section 91, which provide specific relief to taxpayers to save

them from double taxation. Section 90 is for taxpayers who have paid the tax to a country with
which India has signed DTAA, while Section 91 provides relief to tax payers who have paid tax
to a country with which India has not signed a DTAA. Thus, India gives relief to both kinds of
taxpayers.

Did u know? DTAA means that there are agreed rates of tax and jurisdiction on specifi ed
types of income arising in a country to a tax resident of another country.

Example: If a person earns ` 1000000 India, the income tax that will go to the Indian
government will be ` 300000, whereas the foreign government also will demand tax as per the
prevailing laws. This, however, has caused a lot of problems to the income tax payers in the form
of added taxation. Then, there’s also the Double Tax Avoidance Agreement.

A large number of foreign institutional investors who trade on the Indian stock markets operate
from Mauritius and the second being Singapore. According to the tax treaty between India and
Mauritius, capital gains arising from the sale of shares are taxable in the country of residence of
the shareholder and not in the country of residence of the company whose shares have been sold.

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