It Sounds the Same but in Reality, It Is Very Different
Generally, what is the purpose of setting up a business? The ideal answer we get is to be part of an industry and gain better knowledge through business management. Most of the time, this is true. But crucially, businesses desire to obtain profits from whatever they sell to the market. Without enough profits, it could be challenging to sustain it. Companies also know that they must pay tax to the country where they operate and their home country. Companies and individuals working in a country are also required to pay personal income tax if any. Hence, many companies and individuals desirously become part of tax avoidance and evasion India to lower their tax burdens.
The Better Half
Between the two tax complex, tax avoidance would be an excellent and wise twin. Tax avoidance and tax evasion may sound the same as an ordinary individual. But in reality, tax avoidance is allowed by the law. An experienced tax planner can help you lower your taxes due to the government. What’s more, there are state taxes and central taxes in India that may be burdening your business operations and long-term objective. There are tax provisions and loopholes within India’s Income Tax Law that an individual or a company may take advantage of to reduce their taxes. Thus, tax avoidance and evasion in India is more common. The problem arises when companies begin to abuse tax planning to reduce to a minimum or zero tax paid to the government.
The Vice
On the other hand, tax evasion is a crime in India. Tax evasion happens when companies or individuals with wealth do not disclose their annual income to the authorities. Some even admit a fraudulent amount of income, in contrast to the wealth they accumulate. Companies evade paying taxes to the Indian government by transmitting copious amounts of income to their offshore accounts. These offshore accounts are generally located in tax haven countries or jurisdictions. By doing so, companies or wealthy individuals can evade paying taxes in India by declaring it a business transaction. While this may be logical, it is illegal to do so. Cunning companies or individuals sometimes find a way or loophole to avoid paying taxes through double tax avoidance (DTA) agreements with other countries. Abusing the agreement may be costly not only to the individual or company, but it can be expensive to India as well. Trading countries may lose their faith in India’s judiciary system on cracking down illegal tax fraudsters if corrupted companies continue abusing DTAs.
Things to Note
Tax avoidance and evasion in India may be rampant. Avoiding to pay tax by engaging with the loopholes of the law is legal. But, choosing not to pay tax through other means than utilising the Income Tax law in India will face stringent punishment. Defaulters who may have been inflating tax deductions and expenses could face or withhold income amount can face a hefty penalty or a jail term. If an individual or a company desires to lower their tax burden, then tax planning is the way to go. It is legal and acceptable.
