Tax Planning: How Aware Are Salaried Assessees

Tax Planning may be defined as an arrangement of one's financial affairs in such a way that there is no violation of the legal provisions of the Income Tax Act. Though it is an obligation of every citizen to pay the tax honestly under the law, the taxpayer is legitimately entitled to plan his taxes in such a manner that his tax liability is reduced to a minimum. Tax planning not only reduces the tax liability but also helps in achieving the nation's economic and social goals. Tax planning is needed for: (a) Minimizing litigation between the taxpayers and tax administrators; (b) Healthy growth of economy; and (c) Employment generation. In order to reduce tax liability, an assessee has to plan well as to where to invest and how much to invest. In choosing a specific investment, an assessee needs definite knowledge regarding a number of features of investments such as tax benefit, safety of principal, liquidity, stability of income, capital growth, etc. Assessees have to be made aware of the pros and cons of various investment opportunities, tax implications of those investments and the latest information of desired investment portfolio. Hence, a study is undertaken to know the awareness level of salaried assessees regarding tax planning in Erode district, Tamil Nadu. The analysis and result thereof are briefly presented in the article.