Call Us : +91 93310 16791


Tax Planning

What is Tax Planning?

Tax planning is the analysis of one’s financial situation from a tax efficiency point of view so as to plan one’s finances in the most optimized manner. Tax planning allows a taxpayer to make the best use of the various tax exemptions, deductions and benefits to minimize their tax liability over a financial year. Tax planning is a legal way of reducing income tax liabilities, however caution has to be maintained to ensure that the taxpayer isn’t knowingly indulging in tax evasion or tax avoidance.

Tax Planning in India:

In India, there are a number of tax saving options for all taxpayers. These options allow for a wide range of exemptions and deductions that help in limiting the overall tax liability. The deductions are available from Sections 80C through to 80U and can be claimed by eligible taxpayers. These deductions are made against the quantum of tax liabilities. There are various other sections under the Income Tax Act, 1961 that can reduce your tax liabilities such as exemptions and tax credits.

When tax planning is done inside the frameworks defined by the respective authorities, it is fully legal and in fact a smart decision. However, using shady techniques to avoid tax payments is illegal and you may get into trouble for doing so. Tax saving practices include tax avoidance, tax evasion and tax planning. Out of these tax planning is the only legal manner of reducing your tax liabilities. The government offers the different opportunities to save on taxes with the intention of reducing tax burden on a taxpayer through legal income tax planning methods.

Corporate Tax Planning:

Corporate tax planning is a means of reducing tax liabilities on a registered company. The common ways to do this includes taking deductions on business transport, health insurance of employees, office expenses, retirement planning, child care, charitable contributions etc. Through the various tax deductions and exemptions provided under the Income Tax Act, a company can substantially reduce its tax burden in a legal way. Once again, tax planning should not be confused with tax avoidance and all the planning should be done within the framework of law.

There are a couple of other deductions worth exploring.


Deductions From Gross Total Income

Gross total Income is the total of income under all heads for a particular previous year. Out of the said Gross total Income, deductions are allowed under various sections comprised in chapter VI-A. To claim the said deductions, certain conditions have to be fulfilled.

80CCC - Contribution to Pension Fund of LIC

80D - Medical Insurance premia

80DD - Maintenance including medical treatment of handicapped dependent

80DDB - Medical treatment, etc.

80-E - Repayment of loan taken for higher education

80G - Certain Donations to Charitable trusts of institutions for charitable purpose.

80GG - Rent Paid by an Assessee

80GGA - Donations for scientific research or rural or urban development

80-HH - Deduction in respect of profits and gains from newly established industrial undertakings or hotel in backward areas.

80-HHA - Deduction in respect of profits and gains from newly established small scale industrial undertakings in certain areas.

80-HHB - Deduction in respect of profits and gains from projects outside India.

80-HHBA - Deduction in respect of profits and gains from housing projects in certain areas.

80-HHC - Deduction in respect of profits and gains from export of goods outside India.

80-HHD - Deduction in respect of earning in foreign exchange

80-HHE - Deduction in respect of profit from export of computer software, etc.

80-HHF - Deduction in respect of profit from export or transfer of film software, etc.

80-IA - Deduction in respect of profit and gains of certain industrial undertakings or enterprises, etc.

80-IB - Deduction in respect of profit and gains of certain industrial undertakings other than infrastructure development undertakings, etc.

80-JJA - Profits and gains from business of collecting and processing biodegradable waste.

80-JJAA - Deduction in respect of employment of new workmen.

80-L - Interest on securities, dividends, etc.

80 O - Royalties, commissions, fees for professional services etc, earned in convertible foreign exchange

80-P - Certain income of Co-operative Societies

80-R, 80-RR and 80-RRA - Income from foreign sources.

80-U - Income of handicapped Assessee.