https://www.cheggindia.com/earn-online/mastering-tax-planning-and-its-im...
"YouGov’s 2022 survey had few notable revelations. Around 74% of urban Indians agree that income tax is essential for India’s economic development. At the same time, 65% were not happy with the country’s existing tax structure.
You may not know much about how the Indian tax system works. However, you can choose to pay your finances well. That’s where tax planning comes into play. It is nothing but the function of financial planning to ensure that there’s tax efficiency.
Taxes can take a toll on your annual income. How can you reduce your tax liabilities in a given financial year? Tax planning is the only legitimate way to do that. It makes use of the tax deductions, benefits, and exemptions offered by the tax authorities.
Taking these factors into consideration, it comes up with the ideal way to reduce your tax liability. The definition is quite simple. In simple words, the meaning of tax planning is analyzing and managing one’s financial situation. It is done from a tax perspective
In this article, you will get to know more about the concept of tax planning. Everything from the importance of tax planning to tax planning strategies will be discussed.
Let’s Understand What It Is
As per the Indian tax system, the major taxes are levied by the Central and State governments. There are a few minor taxes which are usually levied by local authorities. These include the Gram Panchayat, Municipality and other local bodies.
There are mainly two types of taxes: Direct taxes & Indirect Taxes
Both these taxes are quite the opposite. Direct taxes are charged on profits and income. Indirect taxes are imposed when you make a purchase of goods or services.
The direct taxes are paid directly to the government. Unlike direct taxes, indirect taxes are collected from consumers using an intermediary. It is their responsibility to pay it to the government.
Direct taxes are charged on individuals and corporate entities. The most important one among direct taxes is the Income tax. If your annual income is over the minimum exemption limit, you should pay the income tax. It is stated in the Income Tax Act of 1961.
Capital Gains Tax and Corporate Tax are the other important direct taxes. Capital gains tax refers to tax from profits of selling a capital asset. Corporate taxes are calculated depending on the net income or profits from the business"