Tax evasion may be defined either as the understatement or concealment of a taxable object or as the failure to pay tax m time either by the assessee or his agent. It is the illegal practice of not paying taxes, by not reporting income. On another hand, tax avoidance is the minimization of tax liability by the taxpayer or his agent by efficient tax planning. It is possible by fully complying with the tax laws and meeting tax liabilities.
Distinguish between Tax evasion and Tax avoidance are given below –
- Reducing tax liability by using illegal ways is known as Tax Evasion.
- Tax evasion is the understatement of taxable objects or as the failure to pay tax in time either by the assessee or his agent.
- It is illegal.
- The objectives of it are the tax is not paid by means of concealment.
- In this case, punishment is given to the parties.
- Minimization of tax liability, by taking such means which do not violate the tax rules, is Tax Avoidance.
- Tax avoidance is the minimization of tax liability by the taxpayer by efficient tax planning.
- It is legal.
- The objective of it is reduced tax by existing loopholes in tax rules.
- In this case, punishment is not given to the parties.