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

In the context of corporate tax planning, which of the following best distinguishes lawful tax planning from tax evasion?

Tax planning is the lawful use of deductions, exemptions and structuring choices to lower tax, while tax evasion relies on illegal methods such as concealing income or falsifying books. Evasion invites penalty and prosecution, whereas genuine planning is legitimate and permitted.

1. ATax planning uses legitimate provisions of law to reduce tax, whereas evasion involves illegal means such as concealing income or falsifying recordsCorrect
2. BTax planning always results in a higher tax outflow than evasion, but evasion is penalised only when the tax amount is large
3. CTax planning is done after the assessment is completed, whereas evasion is done before the return is filed
4. DTax planning is allowed only for companies with foreign operations, whereas evasion is possible for every taxpayer