1.

Abstract: -
Tax planning is an essential aspect of financial management for individuals and
businesses alike. The objective of tax planning is to minimize tax liabilities while complying
with the law. The process involves analysing one’s financial situation and applying various
strategies to minimize taxes. This paper discusses tax planning strategies for 10 different types of
taxpayers or “assesses” including individuals, self-employed individuals, partnership firms,
limited liability partnerships, companies, trusts, HUFs (Hindu Undivided Families), NRIs (Non-
Resident Indians), AOPs (Association of Persons) and BOIs (Body of Individuals). The tax
planning strategies vary depending on the type of taxpayer. For individuals, strategies may
include taking advantage of deductions and exemptions, investing in tax-saving instruments, and
utilizing the benefits of filing tax returns on time. Self-employed individuals may benefit from
taking advantage of business expenses and maximizing deductions related to their profession.
Partnership firms and limited liability partnerships may need to structure their business
operations to take advantage of tax benefits, such as reducing the tax liability by allocating
profits and losses among partners. Companies may benefit from tax incentives provided by the
government for investing in certain sectors or regions. Trusts, HUFs, and AOPs have unique tax
planning strategies due to their specific structures and nature of income.

2. Introduction: -
Income refers to the money earned by an individual or entity from various sources such as
salaries, wages, investments, business profits, rental income, etc. It is an essential component of
personal finance and plays a crucial role in determining an individual's financial well-being. The
income earned by an individual or entity is subject to taxation as per the applicable tax laws in
their country. The tax rate may vary depending on the income level, type of income, and other
factors. Managing income is an essential aspect of personal finance, and individuals should plan
their income and expenses to ensure financial stability and achieve their financial goals. It is also
important to ensure that the income earned is legal and reported correctly to avoid any legal or
financial consequences.
  The word tax is a mandatory fee or financial charge levied by any government on an
individual or an organization to collect revenue for public works providing the best facilities and
infrastructure. The collected fund is then used to fund different public expenditure programs.
There are 2 types of taxes – Direct Taxes & Indirect Taxes.
Direct Tax - If tax is levied directly on the income or wealth of persons, then it is known as
direct tax. Examples of Direct Tax – Income Tax.
Indirect Tax - If tax is levied on the price of goods or services then it is known as indirect tax.
Examples of Indirect Tax – GST & Custom Duty.
Income tax is a type of tax governments impose on income generated by businesses and
individuals within their jurisdiction. Income tax is used to fund public services, pay government
obligations, and provide goods for citizens. The federal government and many states, as well as
local jurisdictions, levy their own income taxes. Personal income tax is a type of income tax
levied on an individual’s wages, salaries, and other types of income. Business income taxes
apply to corporations, partnerships, small businesses, and the self-employed. Every income
arising to any person will always be classified under one of the following headers provided by
the Act: –

1. Salaries

2. Income from house property

3. Profit and gains of business or profession

4. Capital gains.

5. Income from other sources

Tax planning refers to the process of analysing one's financial situation to

identify ways to minimize their tax liability within the framework of the law. It
involves making strategic decisions regarding one's income, investments, and
expenses to reduce the amount of taxes owed to the government. Tax planning is a
legal and ethical practice that is designed to help individuals and businesses reduce
their tax burden while remaining compliant with tax laws and regulations. It involves
considering various tax-saving options, such as deductions, credits, and exemptions,
and structuring financial transactions in a way that maximizes tax benefits. Effective
tax planning requires a thorough understanding of the tax code and an awareness of
changes in tax laws and regulations. It is a proactive process that involves regular
review and adjustment of financial strategies to take advantage of new opportunities
and minimize tax liabilities. Overall, tax planning can help individuals and
businesses achieve their financial goals by reducing their tax burden and increasing
their after-tax income.

2. Statement of Problem: -

An individual is not aware about the rules & regulations of income tax. Hence,
they need the services of CA for computing their personal income tax. The firm must use
the new way of working by reminding the clients about the last date of filing the income
tax returns. This way they can increase their client base.
3. Need of Study: -

1. Understand the tax laws and regulations applicable to each assessee.

2. Identify potential tax deductions and credits for each assessee.
3. Ensure compliance with all tax filing requirements and deadlines.
4. Evaluate the potential tax implications of investment decisions.
5. Consider the impact of timing on tax liabilities.
 6. Optimize tax planning to reduce tax liabilities.
7. Keep accurate and organized tax records.
8. Determine the taxable income of each assessee.

4. Relevance & Importance of Study: -

1. Tax planning helps individuals and businesses reduce their tax liability legally.
2. Proper tax planning ensures compliance with tax laws and regulations.
3. Tax planning can help maximize deductions and credits.
4. Proper tax planning can help individuals and businesses avoid audits.
5. Tax planning can help individuals and businesses with estate planning.
6. Tax planning can help individuals and businesses plan for future tax liabilities.

5. Assumptions: -

1. It is assumed that the assessee provides accurate & complete records of their
financial transactions such as income, expenses, investment, etc. & does not hide
any crucial information.
2. Assessee should timely comply with all tax laws & regulations & file their tax
returns in a timely manner to avoid penalties & interest charges.
3. Assessee should disclose all relevant information to the tax authorities as
required by law.
4. The assessee does not carry out any activity which might be considered illegal
according to various provisions of law.

6. Objectives: -

1. To study the Tax Planning Structure of Assesses.

2. To study the provision of income tax act useful for tax planning.
3. To know the tax liability & tax planning of an individual assessee.
4. To study the process of computation of total income of an individual assessee.

7. Statement of Hypothesis: -

The following hypothesis were formulated: -

1. Tax Planning has a significant impact on reducing tax liability for individuals
and businesses.
2. Deductions & Investments are helpful in the process of Tax Planning.
8. Working Definitions: -

1. Tax Planning: - Tax planning is the process of managing your financial affairs
in a way that minimizes the amount of tax you owe. This involves analysing your
income, expenses, and investments to determine how you can take advantage of
various tax deductions, credits, and exemptions to reduce your overall tax
liability. Tax planning can be done at any time during the year but is often done
towards the end of the tax year or at the beginning of a new tax year.

2. Tax Evasion: - Tax evasion refers to the illegal or intentional act of not
reporting or underreporting income or assets to the tax authorities, to avoid
paying taxes that are due. This can include activities such as deliberately failing
to file a tax return, falsifying tax documents, or misrepresenting income,
deductions, or credits to reduce tax liability. Tax evasion is a criminal offense
and can result in hefty fines, penalties, and even imprisonment.

3. Tax avoidance: - Tax avoidance is a legal way of reducing your tax liability by
using methods and strategies that are permitted under the tax laws and
regulations. Tax avoidance involves taking advantage of various tax deductions,
credits, and exemptions to minimize the amount of tax owed. Tax avoidance is
considered legal and acceptable if it is done within the boundaries of the tax laws
and regulations.

4. Person [Section 2(31)]: - The definition of person under section 2(31) is as

under:
(a) An individual: means a natural human being.
(b) A Hindu undivided family means a family which consists of all persons
lineally descended from a common ancestor and includes their wives and
unmarried daughters.
(c) A company: includes Indian and Foreign companies and any other
institutions which has been assessed or assessable as a company.
(d) A firm: means partnership firm which may be registered or unregistered.
(e) An association of persons (A.O.P.): Means when two or more persons come
together for common purpose to earn an income but do not constitute a
partnership, they may be assessed as an association of persons.
(f) A local authority: means any Municipal Committee or District board.

5. Assessment [Section 2(8)]: - This is the procedure by which the income of an

assessee is determined by the Assessing Officer. It may be by the way of a
normal assessment or by the way of reassessment of an income previously
assessed.
 6. Assessment Year [Section 2(9)]: - This means a period of 12 months
commencing on 1st April every year. The year in which income is earned is the
previous year and such income is taxable in the immediately following year
which is the assessment year. Income earned in the previous year 2019-20 is
taxable in the assessment year 2020-21. Assessment year always starts from 1st
April, and it is always a period of 12 months.

7. Previous Year [Section 3]: - The term has been defined under section 3. It
means the financial year immediately preceding the assessment year. As
mentioned earlier, the income earned during the previous year is taxable in the
assessment year.

9. Scope of Study: -

1. The scope of study is to do tax planning of 10 assesses.

2. The study covers individual income tax assesses only.
3. The study also focuses on various new reforms in the taxation system & its
benefits for various classes of assesses.

10. Limitations of the Study: -

1. The project studies the tax planning for individual assessed to income tax.
2. This study covers individual income tax assessee and does not hold good for
corporate taxpayers.
3. The tax rates, insurance plans & premium are all subjected to FY 2021-22.

11. Class of Respondents: -

Individuals including salaried persons, senior citizens, businessmen, partnership

firms, etc. in and around Pune.

12. Universe & Sample Size: -

People in around Pune city having income above the threshold limits and has to
mandatorily file Income Tax Returns, for the purpose of this study samples were chosen
on Random Basis amongst each of the various types of assesses like salaried persons,
partnership firms, companies, etc.
 13. Justification of Sample Size: -

By randomly choosing from each type of assessee like businessmen, partnership firms,
senior citizens, salaried persons, companies, etc. we will get a representation of the entire
universe and will help in the research as every type of assessee would be studied.

14. Research Design: -

The research design for this project on tax planning of 10 assessee is a

qualitative study. It involves the collection and analysis of data from interviews with the
10 chosen individuals to understand their tax planning strategies, practices, and
challenges. The research design includes the following steps:

(a) Selection of 10 participants based on their profession, income, and tax

liabilities.
(b) Development of an interview guide consisting of open-ended questions to
elicit information on their tax planning strategies.
(c) Conducting interviews with the participants either in person or via video
conferencing
(d) Transcribing and analysing the interview data to identify common
themes, patterns, and challenges in their tax planning strategies.
(e) Drawing conclusions and making recommendations based on the
findings.

15. Sources of Data: -

(a) Income Tax Act, 1961

(b) CA Firm – Assessee Data

16. Method of Data Collection: -

The sources of data for this project could include:

1. Primary data: Collected by Personal interview method by meeting various

assessee one to one. Preparation of questionnaire was done to meet the objectives
of the project.
 2. Secondary data: Collected by usance of various books, magazines & websites
and Review of tax laws and regulations, previous research studies on tax
planning, and published reports on the tax liabilities and practices of individuals
and businesses in Pune.

17. Tools of Data Analysis: -

The usance of Percentage of Analysis by seeking the Google spreadsheets help in
the analysis of all assesses.

18. Note on Statistical Tools to Data Analysis: -

For the purpose of data analysis, statistical tools like Tabulation Method , Graphs
and Pie-Charts are used for better understanding of data.

19.Techniques of Data Analysis: -

Techniques like Microsoft office, Excel Sheet Word, and software’s like Comp
Office are used for the purpose.

20. Review of Relevant Literature: -

Various books of Taxman Publications, ICAI Publications, Tax Planning –

Business & Economics, etc.
Websites
1. www.cleartax.in
2. www.ey.com
3. www.edelweissmf.com