Page 195 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes (c) Double taxation: Double taxation means that many countries charge taxes on the income
that has been earned inside that country without taking into consideration, the resident
country of the firm or person. So that people do not have to pay double taxes, once in the
country where the income has been earned and then again in the resident country, many
countries have gone for bilateral treaties of double taxation with other countries. This
helps tax-payers as they are able to avoid paying double taxes.

Task Make a list of the countries those are having double tax avoidance agreement with
India.

Did u know? Tax Avoidance reduces the revenue of the government and also brings into
disrepute, the tax system. Ideally, Avoidance of Tax should not be encouraged and the
government should also take measures in order to prevent it.

Self Assessment

Fill in the blanks:

1. Sale tax is a kind of ...................... .
2. Tax Planning thus can be defined as an arrangement of the financial affairs within
the....................... .

3. Tax evasion is ...................... of tax even when it is due to be paid.
4. Tax evasion is ....................... .
5. Tax Avoidance reduces the ...................... of the government.

11.4 Objectives of Tax Planning

The prime objectives of tax planning may be summarised as follows:
1. Reduction of tax liability: By proper tax planning, a tax payer can oblige the administrators
of the taxation laws to keep their hands off from his earnings.

2. Minimisation of tax liability: Proper tax planning in conformity with the provisions of
the taxation laws, the chances of unscrupulous litigations are certainly minimised and the
tax payer is saved from the hardships and inconveniences caused by the unnecessary
litigations.
3. Productive investment: Taxation laws offer large avenues for the productive investment
of earnings, granting absolute or substantial relief from taxation. A taxpayer has to be
constantly aware of such legal avenues as are designed to open the floodgates of his well-
being, prosperity and happiness.
4. Healthy growth of economy: A savings of earnings by legally sanctioned devices is the
prime factor for the healthy growth of the economy of a nation and its people. An income
saved and wealth accumulated in violation of law are the scourge on the economy and the
people. Generation of black money darkens the horizons of the national economy and
leads the nation to avoidable economic destruction.
5. Economic stability: Under tax planning, taxes legally due are paid without any headache
either to the tax payer or to the tax collector. Avenues of productive investments are

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