Skip to content

CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Nature of Business

In corporate tax planning, which statement best distinguishes tax planning from tax evasion?

Tax planning is lawful use of deductions, exemptions and incentives consistent with the law's intent, whereas tax evasion is illegal reduction of tax through concealment of income, false entries or inflated expenses. The distinction rests on legality and not on the amount of tax saved.

  1. ATax planning uses lawful options and incentives within the letter and spirit of law, while tax evasion involves illegal means such as concealing income or inflating expensesCorrect
  2. BTax planning and tax evasion differ only in the amount of tax saved, not in legality
  3. CTax evasion is legal if the taxpayer discloses the transaction to a tax consultant
  4. DTax planning means postponing all tax payments beyond the due date without penalty

Explanation

Tax planning is the lawful arrangement of affairs to use deductions, exemptions and incentives. Tax evasion relies on illegal methods such as suppressing receipts or falsifying books. The difference is legality, not the quantum saved, so the other options are wrong.

Did you get it right without looking?

One question tells you little. A timed set on Tax Planning and Nature of Business shows your real accuracy, how long you take and where you lose marks.

Practise Tax Planning and Nature of BusinessFree diagnostic mock

More Tax Planning and Nature of Business questions