Tax management broadly refers to the management of finances, for the purpose of paying taxes. It deals with filing of Returns in time, getting the accounts audited, deducting tax at source etc. Tax Management helps in avoiding payment of interest, penalty, and prosecution.
Elements of tax management are:
- Filing return.
- Auditing.
- Source deduction
Tax Planning vs Tax Management
| Tax Planning | Tax Management | |
|---|---|---|
| Definition | The process of identifying tax-saving opportunities | The process of implementing tax-saving strategies |
| Goal | To minimize tax liability by legally reducing taxes | To optimize tax burden and ensure compliance |
| Focus | Future tax liabilities | Past and present tax liabilities |
| Timeframe | Long-term | Short-term |
| Scope | Comprehensive | Limited to specific tax issues or situations |
| Activities | Analyzing tax implications of business decisions | Filing tax returns, paying taxes, resolving disputes |
| Involvement | Typically handled by tax professionals | Handled by both taxpayers and tax professionals |
FINANCIAL FORECASTING?
Financial forecasting is predicting a company’s financial future by examining historical performance data, such as revenue, cash flow, expenses, or sales. This involves guesswork and assumptions, as many unforeseen factors can influence business performance.
Financial forecasting is important because it informs business decision-making regarding hiring, budgeting, predicting revenue, and strategic planning. It also helps you maintain a forward-focused thinking.
Each financial forecast plays a major role in determining how much attention is given to individual expense items. For example, if you forecast high-level trends for general planning purposes, you can rely more on broad assumptions than specific details. However, if your forecast is concerned with a business’s future, such as a pending merger or acquisition, it’s important to be thorough and detailed.
FINANCIAL FORECASTING TO PREDICT BUSINESS PERFORMANCE
Much of accounting work consist of evaluating past performance. Financial results demonstrate business success to different stakeholders. Planning and preparing for the future, however, is just as important.
The financial planner must reassure the shareholders that a business has been and will continue to be successful. This requires financial forecasting.
Tax-Saving Instruments and Their Returns
Tax saving is a prime tool for many investors to prevent the erosion of the total income generated. There are various investments that provide this benefit, thereby significantly increasing the effective investment portfolio in India as all individuals want to avail themselves of this advantage.
Some of the best tax-saving investments options that can reduce your tax outgo are :
Comparison Of Various Tax Saving Instruments
| INSTRUMENT | LOCK-IN PERIOD (years) | RETURN | TAX EXEMPTION |
|---|---|---|---|
| ELSS | 3 | Market-oriented | 1.5 Lakh on principal |
| PPF | 15 | Fixed (depends upon the interest set by the government) | 1.5 Lakh on principal |
| ULIP | 5 | Fixed (depends upon the interest set by the government) | 1.5 Lakh on principal |
| SSY | 21 | Fixed (depends upon the interest set by the government) | 1.5 Lakh on principal |
| SCSS | 5 | Fixed (depends upon the interest set by the government) | 1.5 Lakh on principal |
| NPS | Can only be drawn when the individual attains the age of 60. | Fixed (depends upon the interest set by the government) | 1.5 Lakh on principal |
| LIFE INSURANCE | Depends upon the scheme chosen by an individual | Fixed (depends upon the interest set by the insurance company) | 1.5 Lakh on insurance premium |
| NSC | 5 or 10 years | Fixed (depends upon the interest set by the government) | 1.5 Lakh on the principal |
| NSCFIXED DEPOSIT | 5 | Fixed (depends upon the interest set by the government) | 1.5 Lakh on the principal |
