Tax planning meaning

The purpose of tax planning is to ensure tax efficiency. Through tax planning, all elements of the financial plan work together in the most tax-efficient manner possible. Tax planning is an essential part of a financial plan. It helps in effective cash flow and liquidity management for taxpayers and better retirement plans and investment opportunities. This requires investors and companies to give consideration not just to the size of their incomes or profits, but also to the nature and timing of purchases, insurance coverage and the types of investments they make.

The idea is to reduce the tax burden of the assets without breaking the law.

Example : Suppose , at the end of the income year, an assessee finds his taxes have been too high in comparison with last year and he intends to reduce it. Free for Simple Tax Returns. Maximum Refund Guaranteed. For a small business, minimizing the tax liability can provide more money for expenses, investment, or growth.

In this way, tax planning can be a source of working capital. Considering the tax implications of individual or business decisions throughout the year, usually with the goal of minimizing the tax liability. Use tax planning in a sentence. You should always try to be good at tax planning so that you know you are prepared for what ever comes your way.

The basic difference between tax planning and tax management is that tax planning stresses on reducing the tax liability, tax management is all about minimizing the taxes.

They are also called equity-linked tax saving funds or ELSS. These funds are market capitalization agnostic. These are close ended schemes with a lock-in period of years. If you become really successful, taxes will probably be your single. As life progresses and goals shift, the estate plan should shift in line with new goals.

The process includes such elements as managing tax implications, understanding what type of expenses are tax deductible under current regulations,. The first step in developing a year-end tax planning strategy is to develop a communication plan, consisting of a list of clients with the type of communication the CPA intends to provide to each client. By employing effective tax planning strategies, you can have more money to save and invest or more money to.

Normal tax planning means using established procedures to reduce the tax burden When it becomes aggressive, every possible loophole or clause that can be interpreted to be used in a way to save on tax is used. You can do all three for the best possible result. While tax planning is optional, tax management is mandatory. Therefore, tax planning exercise is as crucial as you plan for your other financial goals. And remember to commence your “tax planning” exercise well in advance and complement this with your overall investment planning exercise.

If you are a married joint filing taxpayer and your taxable income is below $775 you pay zero tax on capital gains held more than one year. Summer Tax Tips Smart tax planning happens all year round. Here are four things you can do this summer to improve your standing when tax time rolls around again. Tax Planning For Capital Gains.

Some forms of avoidance are merely tax planning by using reliefs or exemptions, for example, by choosing tax -efficient investments. Efficient tax planning enables us to reduce our tax liability to the minimum.

Base erosion and profit shifting (BEPS) refers to tax planning strategies that exploit gaps in the architecture of the international tax system to artificially shift profits to places where there is little or no economic activity or taxation. A fee charged (levied) by a government on a product, income, or activity. If tax is levied on the price of a good or service, then it is called an indirect tax.

One of the most important uses.