Tax planning: The skill that you need to master in 2023

Tax planning: The skill that you need to master in 2023

Finance courses are the hottest ones in the commerce stream because they are so useful. Both from the perspective of knowledge and career, they rank highly. 

But, which section of the finance courses offers the best prospects? According to the opinion of experts, tax planning is one of the best fields in this particular career stream. A tax planning course equips you with critical information. And, the career of a tax analyst and consultant offers unlimited growth. It can even give you an opportunity for self-employment. 

What is tax planning?

Taxes can take away a part of your annual income. Thus, tax planning is necessary beforehand. It is a way of lowering tax liabilities in a particular financial year. It helps you utilise the tax provisions in the country to minimise liability.

The definition of tax planning is quite simple. It analyses one’s financial standpoint, concerning tax efficiency. Apart from PG in finance courses, banking diploma courses after graduation are also helpful in making you a tax consultant.

What is the objective of tax planning?

Tax planning is the cynosure of any individual or corporate body’s financial plans. The sole purpose of it is to ensure that one can make tax savings. It also allows a capital entity to conform to the Income Tax Act, 1961’s legal obligations. 

Apart from saving money, tax planning helps to ease one's financial burdens, giving them an understanding of how to use several tax benefit rules. But, saving money and lessening the tax burden is not the only aim of tax planning.

As a tax consultant, you shall also be able to advise your clients how to invest while helping them keep an eye on what transaction or financial action draws the least amount of taxation. 

Apart from that, you will also help them to manage their taxes in a better way. One of your other unspoken responsibilities is to ask people to conform to the tax obligations they owe to the government as per the Income Tax Act, 1961. 

You will also be able to save people from paying extra on several forms of charges. All in all, you will have to deal with direct and indirect taxation while helping out your clients. 

What are the benefits of tax planning?

• Saves you from tax litigation

Resolving tax disputes with local, state and central authorities or foreign entities and tax authorities is covered under tax litigation. Tax collectors and taxpayers have been jostling for centuries. One tries to extract the maximum while the other attempts to keep minimum tax liability and avoid a tax dispute. This helps to avoid any type of tax-related litigation.

• Reduction of tax liabilities

Reducing the tax burden is every taxpayer’s wish. Some instruments and benefits are provided under the Income Tax Act, 1961. A tax consultant has to help his/her client match the right scheme, which ensures the client's minimum tax liability and maximum tax benefit.

• Ensure stability of the economy 

As mentioned above, a tax consultant has some duty towards the country. With the help of effective tax planning, they help in the influx of white money for the country's growth and help the economy and the citizens enjoy the benefits of a stable economy. 

• Leveraging productivity

By channelling funds from sources that can be taxed to several investments generating revenue, a tax planner ensures the optimal use of funds for increasing a client’s liquid cash reserves. This way,  they ensure that the money stays productive and does not stagnate in a savings account.

Types of tax planning consultants do 

Apart from reducing a client’s tax liabilities, a tax planner/consultant helps to invest in the right securities. This way, a tax planner helps clients to achieve their financial goals.

They perform four critical types of tax planning:

• Short-range tax planning

In the concluding part of a financial year, the tax plans are executed by allowing investors to limit their tax liability legally.

• Long-term tax planning

This plan is initiated in the beginning part of the financial calendar and the execution is carried out. The tax benefits will not be immediate, but they give several capital gains and reduce tax liability in the long run.

• Permissive tax planning

Tax planning under several Indian taxation law provisions like the deductions, incentives and exemptions under Section 80C of the Income Tax Act 1961 is called permissive tax planning.

• Purposive tax planning

With a specific aim in mind, a tax planner or consultant uses several tax saver instruments to create the appropriate investment opportunities and help the client diversify assets.

If you are interested in becoming a tax planner, then you should choose the best postgraduate finance courses in India from Imarticus Learning, which will help you to embark on your taxation career. So, don’t hesitate and enrol now!