Taxes are mandatory financial charges levied by the government of a country on companies or individuals in order to accumulate enough revenue to build the best infrastructure and provide other public services that can be enjoyed by the citizens. The government receives taxes from all of its citizens in various different forms.
There are many types of taxes such as indirect tax, direct tax, state taxes, central taxes, etc. If you fail to pay any of these taxes on time, serious action may be taken against you. Once you know how and when to pay for which taxes, the next step is to plan the payment of the taxes carefully. You can devise a good plan and end up saving your money for future savings in the place of tax liabilities if you know the process of tax planning.
What is Tax Planning?
Tax planning is a small process to help you in lessening the number of liabilities credited from your taxes during a financial quarter. Taxes can reduce your annual salary and savings.
Tax planning aids in equipping you with the correct address about tax exemptions, deductions as well as some benefits are offered to you and result in minimizing your tax liabilities.
Benefits of Tax Planning
Tax planning is essential for many reasons. Some of the major benefits and advantages of tax planning are as follows:
- To reduce liabilities
It is every citizen’s wish to reduce the burden of taxes. You can do so by studying the Income Tax Act, 1961 and partake in a few schemes that it talks about which can minimize your tax liabilities.
- To reduce litigations
The conflict between tax collectors and taxpayers can be resolved properly since the taxpayers can keep their liabilities to a minimum while the tax collectors collect the exact same amount of money.
- To leverage productivity
Optimization of funds from various taxable sources to many other plans which have the potential to generate income is possible and enables higher productivity levels.
- To ensure economic stability
Effective tax planning along with correct tax management will boost the economic growth and development of the country.
Objectives of Tax Planning
The Income Tax Act was put forth on 13th September 1961. Tax planning guarantees complying with existing legal obligations of the Income Tax Act and simultaneous reduction in your liabilities. It is an essential part of your overall financial planning. Few main objectives of tax planning are as follows:
- Saving your money
- Mitigating your taxes
- Minimizing tax liability
- Economic growth
Tax planning has become pivotal for every individual’s financial planning all over the world. Planning taxes in advance gives you gst advantages. Tax planning is a smart decision that is authorized by the government and a legal way to mitigate your liability if performed prudently. If you do not plan your tax well, you might need to pay a fine. You can know the disadvantages of gst that you might face if you avoid tax planning. Avoid illegal techniques to reduce your tax payments and resort to smart tax planning instead.