Difference Between Tax Planning and Tax Management

Paying Income Tax every year is mandatory for all taxpayers in India. It may be imposed by the Central or State Government on income, wealth or goods and services purchased by an individual. For someone who is new to paying taxes, tax planning and tax management may sound similar, and they are often used interchangeably.

But there is a huge difference between the terms. So, let's take a look at what they mean and what are some key differences between tax planning and tax management-

So, what is tax planning? Tax planning can be defined as the process of minimising your tax liabilities by taking advantage of the deductions, exemptions, allowances, rebates, and concessions available under tax laws. In other words, it is a legal method used by taxpayers to reduce their income tax liabilities. 

For efficient tax planning, the income and financial activities of the taxpayer are closely analysed to look for various tax provisions under which the tax burden could be minimised legally. However, tax planning is not mandatory for every assessee. It is up to the taxpayers whether they'd like to take advantage of the tax-saving provisions.

Tax management is the process deployed by taxpayers to comply with tax laws. All the tax-related aspects, such as penalties, appeals, prosecutions, and tax case settlements, are parts of tax management.

Under a tax management strategy, a taxpayer's past, present, and future tax-related activities are analysed to ensure compliance and avoid the imposition of penalties and interest. Unlike tax planning, tax management is mandatory for every assessee. Therefore, every taxpayer must comply with all the tax laws or face interest penalties.

Here are the key differences between tax planning vs. tax management-

Income tax is one of the most significant revenue sources for the government. The tax money collected by the government is used to perform civil operations, offer welfare schemes, and take other steps to build the nation.

Individuals and organisations must pay income tax according to their income and applicable tax provisions to contribute towards nation-building and the well-being of society. And with the help of tax planning and tax management, taxpayers can legally minimise their tax liabilities, comply with tax regulations, and protect themselves against penalties and other stringent punishments.

Effective tax planning and management require a reliable banking partner, like AU Small Finance Bank. The largest Small Finance Bank (SFB) in India offers a wide array of tax-saving investment products, like AU 5-Year Tax Saving Fixed Deposits, National Pension System (NPS), Atal Pension Yojana (APY), Life Insurance and Health Insurance.

Visit our website or download the AU 0101 App to save and invest in these products from the comfort of your home and start saving taxes. 

Read More: Income Tax Exemptions and know how to save income tax in India