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Unit 11: Taxation Planning

Double Taxation: Double taxation means that many countries charge taxes on the income that Notes
has been earned inside that country without taking into consideration, the resident country of
the firm or person.
Indirect Taxes: Indirect taxes are collected indirectly as a part of prices of goods and services on
which these are levied.

Tax Avoidance: Tax avoidance is minimizing the incidence of tax by adjusting the affairs in such
a manner that although within the four corners of the taxation laws, the advantage is taken by
finding out loopholes in the laws.
Tax Evasion: Tax evasion is sheer non-payment of tax even when it is due to be paid in the
circumstances of the case.

Tax Exemption: A tax exemption is an exemption from all or certain taxes of the nation in which
part of the taxes that would normally be collected from an individual or an organization are
instead foregone.
Tax Holiday: A tax holiday is a temporary reduction or elimination of a tax. Governments
usually create tax holidays as incentives for business investment.

Tax Planning: 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.

11.12 Review Questions

1. What are the methods commonly used by tax payers to minimise tax liability? Which one
will you recommend?
2. What is the difference between Tax planning and Tax evasion?
3. Can you enumerate the difference between Tax avoidance and Tax evasion?
4. What are the factors that are helpful for effective tax planning?
5. Tax planning may be effective in every area of business management. Discuss some of the
important areas where tax planning may be attempted.
6. Can you summarize the objectives of Tax Planning?
7. What are the incomes from house property which is exempted from tax?

8. Explain the business expenditure which is allowed as deductions from the business income.
9. Elucidate upon any seven incomes which are exempt from tax.
10. When minors are not allowed to be employed under the Constitution of India, can a
minor still have income? If yes then how? Analyze the exemption from income-tax
available in the case of a minor child.
11. Elucidate upon the exemption from income-tax available in the case of dividend income
received from an Indian company.
12. Define the term tax holidays. What are the different tax incentives for new units established
in SEZ?

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