News By/Courtesy: Amaruvi Vijay Sudharshan | 02 Jul 2020 10:29am IST

HIGHLIGHTS

  • Any action that is taken to lessen the tax burden can be defined as tax avoidance
  • Only the deductions permitted by the law is legal
  • Many of the tax shelters are legal and they can be used for many investment strategies for taking tax deductions and tax credits

These are the concepts that you may have heard of before. Though they have a negative sound to them, that may not always be the case. They may even sound illegal. 

So let us dive into what they are:

  1. Tax avoidance: Any action that is taken to lessen the tax burden can be defined as tax avoidance. The main purpose is to minimize a person’s tax liability and maximize his income. Tax avoidance is legal because there are many ways in which you can legally claim deductions, tax credits, or any other adjustments to the income. Anything else is illegal and is liable to be punished. Only the deductions permitted by the law is legal. 

  2. Tax evasion: Tax evasion is deliberately not paying the taxes that one is supposed to pay. It can also mean the deliberate underpaying of the taxes. The United States federal income tax system requires a person to pay income tax on income earned worldwide. 

Some examples of tax evasions are:

  • Filing a false return

  • Keeping a double set of books

  • Making false invoices

  • Concealing sources of income

There are various penalties that the government imposes for the non-payment of the taxes. Some of these are:

  1. Collecting up to 300% of the income tax. 

  2. If a person has failed to pay the tax due, the assessing officer can impose a penalty amount, but the penalty amount cannot exceed the tax amount. 

  3. If a person fails to maintain their accounts properly as per Section 44AA of the IT Act, a penalty of Rs. 25,000 may be levied 

  4. If a company does not get itself audited or does not produce a report of the audit, a penalty of 1.5 Lakhs or 0.5 % of the sales turnover whichever may be less may be charged.

  5. If the accountant’s report is not provided, then a fine of one hundred thousand rupees may be levied. 

  6. In case an organization fails to deduct tax where it is supposed to, then the penalty could be the tax due.

3.Tax shelters: They are the strategies that are used to avoid the payment of taxes. Many of the tax shelters are legal and they can be used for many investment strategies for taking tax deductions and tax credits. Tax shelters, however, have to be thoroughly scrutinized by competent professionals before making use of them. 

THIS ARTICLE DOES NOT INTEND TO HURT THE SENTIMENTS OF ANY INDIVIDUAL, COMMUNITY, SECT, OR RELIGION ETCETERA. THIS ARTICLE IS BASED PURELY ON THE AUTHOR'S PERSONAL VIEWS AND OPINIONS IN THE EXERCISE OF THE FUNDAMENTAL RIGHT GUARANTEED UNDER ARTICLE 19(1)(A) AND OTHER RELATED LAWS BEING FORCE IN INDIA, FOR THE TIME BEING.

Section Editor: Pushpit Singh | 02 Jul 2020 15:15pm IST


Tags : Tax

Latest News







Copyright Kalyan Krishna MediaZ Private Limited. All rights reserved. Unless otherwise indicated, all materials on these pages are copyrighted by Kalyan Krishna MediaZ Private Limited. All rights reserved. No part of these pages, either text or image may be used for any purpose. By continuing past this page, you agree to our Terms of Service, Cookie Policy, Privacy Policy and Content Policies.