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Tax evasion intentional and fraudulent attempt to escape payment of taxes in whole or in part. If proved to be intentional and not just an error or difference of opinion, tax evasion can be a chargeable Federal crime. Evasion is distinguished from attempts to use interpretation of tax laws and/or imaginative accounting to reduce the amount of payable tax.
Tax planning or tax avoidance is the process whereby an individual plans his or her finances so as to apply all exemptions and deductions provided by tax laws to reduce taxable income.
Apex courts of most of the European countries and US Supreme court has ruled out that tax avoidance is the right of taxpayer. In subcontinent Indian Supreme Court in its historical judgment McDowell & Co. Ltd. v. CTO1 cited as (2003)5 SCC (Jour)15 has ruled out that tax avoidance is legal and under the laws of equity.
Tax evasion is an illegal means of tax avaoidance, against the spirit of the tax Laws.
Tax Planning is a legal way of tax avoidance planning to avoid tax in conformity with the provosions of Tax Laws.
