Page 219 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes 8. The amount exempt under section 10(5) is the value of any travel concession or
assistance received or due to the assessee from his employer for himself and his
family in connection with his proceeding on leave to any place in India.
9. Any sum received on life insurance policy (including bonus) is not chargeable to
tax.

10. Only two journeys in a block of three years is exempt from tax.
B. Fill in the blanks:
11. Tax exemptions are usually meant to either reduce the tax burden or to promote
some type of ..................... through reducing the tax.
12. The ..................... are enumerated in section 10 of the Act.
13. A tax holiday is a ..................... or elimination of a tax.
14. A tax holiday is available in respect of profits derived from ..................... by a 100%
export oriented undertaking.
15. A new units located in a ..................... can avail the100% tax benefit for first five years.

11.10 Summary

The meaning of tax planning i.e. arrangement of one’s financial and economic affairs by
taking complete legitimate benefit of all deductions, exemptions, allowances and rebates
so that tax liability reduces to the minimum. Tax Planning thus can be defined as an
arrangement of the financial affairs within the scope of law in a manner that derives
maximum benefit of the exemptions, deductions, rebates and relief and reduces tax liability
to the minimal.
As long as one is within the framework of law, one can plan financial affairs in such
manner which keeps tax liability at its minimum. However, in the name of tax planning,
one should not indulge in Tax Evasion, and the line between Tax Planning and Tax
Avoidance is very thin, so one needs to tread carefully.
Tax evasion is sheer non-payment of tax even when it is due to be paid in the circumstances
of the case.
Tax planning can be broadly divided into two parts: Short-term tax planning and Long-
term tax planning.

Short term tax planning is normally for a period of up to a year and it is done from year to
year to achieve some particular objective. On the other hand, the long-term planning will
be for a longer period and it may not pay off immediately.

Though every income is taxable under income tax law, whether it is received in cash or in
kind, whether it is capital or revenue income, but still some incomes are given exemption
from tax.
Some important incomes that are exempted from income tax include agricultural income,
income of minor, family pension; leave travel commission and dividend income.
11.11 Keywords

Direct Tax: Direct taxes are collected by the government directly from the tax payer through
levies such as income tax, wealth tax and interest tax.

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