Everyone wants to escape from paying taxes, which encourages them to use various means to avoid such payment.
But how do you legally avoid paying more taxes. This is the time when there is a fine line between Tax Avoidance and Tax Evasion.
Tax avoidance is the arrangement of one’s financial affairs to minimize tax liability within the law. It refers to finding out new methods or tools to avoid the payment of taxes which are within the limits of the law. This can be done by adjusting the accounts in a manner that it will not violate any tax rules as well as the tax incurrence will also be minimized.
Tax evasion An illegal act, made to escape from paying taxes is known as Tax Evasion. Such illegal practices can be deliberate concealment of income, manipulation in accounts, disclosure of unreal expenses for deductions, showing personal expenditure as business expenses, overstatement of tax credit or exemptions suppression of profits and capital gains, etc. This will result in the disclosure of income which is not the actual income earned by the entity.
Do not make the mistake of mistakenly doing a Tax Evasion.