Tax evasion means a method of evading tax liability by dishonest means like suppression, conscious violation of rules, inflation of expenses etc. Tax evasion involves use of unfair means while tax avoidance takes into account various lacunas of law.
Tax evasion generally begins after the liability of tax has arisen, whereas tax avoidance begins before the actual liability of tax has arisen.
Tax avoidance means planning for minimization of tax burden according to the provisions of the tax laws and within legal framework, though it defeats the basic intention of legislature.
Tax planning is carried out within the framework of law by availing the deductions and exemptions permitted by law and thereby minimizing the tax liability. Tax planning is an arrangement by which full advantage is taken of the concessions and benefits conferred by the statute, without violation of legal provisions.
