NEED FOR INCOME TAX PLANNING
Tax Planning is the process of arranging your income in ways that postpone or avoid taxes. By employing effective tax planning strategies, you can have more money to save and invest or more money to spend.
Tax Planning means deferring or avoiding taxes by taking advantage of beneficial tax-law provisions, increasing and accelerating tax deductions and tax credits, and generally making maximum use of all applicable breaks available under Income Tax Act, 1961.It involves planning in order to avail all exemptions, deductions and rebates provided in Act
From the angle of Tax payer to pay less tax by applying tax planning tools using all available exemptions, deductions, reliefs, and rebates within the boundaries of Law is the aim.
Tax Planning is resorted to maximize the cash inflow and minimize the cash outflow. Since Tax is kind of cost, the reduction of cost shall increase the profitability. Every prudent person, to maximize the return, shall increase the profits by resorting to a tool known as a Tax Planning.
Benefits of Tax Planning:
1.Reduction of Tax liability : right tax planning strategies will reduce tax liability and give more money in the hand of investor and give opportunity.
2.Minimisation of litigation : to avoid litigation with income tax department you need save within the purview of tax laws applicable to your income.
3.Productive investment : by minimising tax within the law you can still create asset by investing in the right product. e.g.if you take home loan it will benefit multiple way. Your EMI includes principle+interest both will be eligible for tax rebate. On the other hand you will acquire asset which will appreciatein the long term and even you can earn from that home by renting out it.
4.Healthy growth of economy : when you paying tax to the government your participating in the country’s growth. Similarly when are saving in various tax rebate you are also helping government to grow economy.