suresh Concept of "Tax Avoidance" versus "Tax Evasion"
When it comes to taxes, it is crucial to differentiate between tax avoidance and tax evasion. While tax avoidance is the legitimate practice of minimizing tax liability by using legal means within the confines of the law, tax evasion is the illegal act of not paying taxes owed by either misrepresenting information or concealing income.
Example of Tax Avoidance:
An example of tax avoidance could be a business utilizing tax credits and deductions provided by the government to lower their taxable income. By taking advantage of these incentives legally, the business is able to reduce their tax burden without breaking the law.
Example of Tax Evasion:
Conversely, tax evasion could involve an individual deliberately underreporting their income or inflating expenses to pay less tax than owed. This illegal act can result in severe penalties and consequences, including fines and potential imprisonment.
As a Chartered Accountant, it is important to advise clients on lawful tax planning strategies to minimize tax liability while ensuring compliance with tax laws and regulations.
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