Tax evasion vs tax avoidance: How are the two different?

livemint.com:

Income Tax Act is the primary provision addressing tax evasion in India. This section specifies the penalties for individuals intentionally trying to evade taxes, which can range from imprisonment to fines. The magnitude of the penalty is determined by the amount of tax evaded.

Additionally, tax evasion can result in legal complications under the Prevention of Money Laundering Act (PMLA), especially, when income concealment occurs through illicit methods. Tax avoidance centres on using legitimate strategies to reduce your tax liability. It utilises the structure of tax laws to your benefit.

Section 80C of the Income Tax Act serves as an ideal illustration, permitting deductions for certain investments and promoting tax-efficient planning. As long as your approaches adhere to the Income Tax Act and avoid any fraudulent actions, tax avoidance is entirely legal and acceptable. Some common tax avoidance strategies include: Tax avoidance, although legal, can present a complex issue with ethical implications.

Here’s why: Globalisation has paved the way for international tax planning, which can be an intricate yet lawful strategy for multinational corporations. Here’s how international tax planning plays a role in tax avoidance: It’s crucial to differentiate between tax avoidance, which utilises legal methods to reduce tax liabilities, and tax evasion, which involves intentionally deceiving tax authorities. Tax evasion is prohibited under Section 276C of the Income Tax Act and could activate provisions of the PMLA.