Question

Consider the following statements:

1. Tax planning is legal in India
2. Tax avoidance is legal
3. Tax evasion is unethical but legal.

Which of the above statements are correct?

• A.
  1 only
• B.
  1 and 2
• C.
  1 and 3
• D.
  1,2 and 3

Answer 1

The correct option is B

1 and 2
Tax avoidance is the act of minimizing tax liability within the limits of the law or without breaking the law. In other words, taxpayers can use legitimate methods to reduce the amount of tax payable in association with their financial activities.

Tax planning is the process of elaborating the company's financial related matters to maximize the tax benefits under eligible provisions of the tax framework.

Tax evasion is illegal.