DRIVE FALL 2017

PROGRAM Master of Business Administration- MBA

SEMESTER 3
SUBJECT CODE & NAME FIN303-Taxation Management
BOOK ID B1760
CREDITS 4
MARKS 30 Marks each

SET-I

1. Explain the objectives of tax planning. Discuss the factors to be considered in

tax planning?
A. Objectives of Tax Planning:
 Reduction of Tax Liability: An assesse can save the maximum amount of tax, by properly
arranging his/her operations as per the requirements of the law, within the framework
of the statute.
 Minimization of Litigation: There is a war-like situation between the taxpayers and tax
collectors as the former wants the tax liability to be minimum while the latter attempts
to extract the maximum. So, a proper tax planning aims at conforming to the provisions
of the tax law, in such a way that incidence of litigation is minimized.
 Productive Investment: One of the major objectives of tax planning is channelization of
taxable income to different investment plans. It aims at the optimum utilization of
resources for productive causes and relieving the assesse from tax liability.
 Healthy Growth of Economy: The growth and development of the economy greatly
depend on the growth of its citizens. Tax planning measures involve generating white
money that flows freely and results in the sound progress of the economy.
 Economic Stability: Proper tax planning brings economic stability by various techniques
such as mobilizing resources for national projects or availing ways for investments which
are productive in nature.

Factors in Tax Planning:

The following factors are essential for effective tax planning:

1. Residential status and citizenship of the assessee: We know that a non-resident in India is
not liable to pay income-tax on incomes which accrue or arise and are also received outside
India, whereas a resident in India is liable to pay income-tax on such incomes. Therefore, every
assessee would like to be a non-resident in India, if he has any income which accrues or arises
outside India.
2. Heads of income/assets to be included in computing net wealth: Before the Tax-planner
goes in for his task; he has to have a full picture of the sources of income of the tax payer and
the members of his family. Though total income includes all income from whatever source
derived, the scope of tax planning is not similar in respect of all sources of income

3. Latest legal position: It is the foremost duty of a tax-planner to keep him fully conversant
with the latest position of the taxation laws along with the allied laws and also the judicial
pronouncements in respect thereof.

4. Form vs Substance: A tax planner has to bear in mind the following principles enunciated by
the courts on the question whether form or substance of a transaction should prevail in Income-
tax matters.

(a) Form of transaction

(b) Genuineness of transaction

(c) Expenditure