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Difference between Tax Avoidance and Tax Evasion:

Tax Avoidance in India

Tax avoidance is a method of using the loopholes existing in the laws in order to save taxes. Tax avoidance is generally used by big business houses and companies who make use of such loopholes, deductions and tax rates in order to reduce the tax burden borne by these companies.

Tax avoidance is done without breaking any laws or rules under the income tax act. The main objective of tax evasion is to save a large amount of money by taking advantage of the loopholes present in the income tax acts.

Difference between Tax Avoidance and Tax Evasion:

Tax avoidance involves the method of carefully examining the laws and exploiting the loopholes in the system. Tax evasion is illegal in India whereas tax avoidance is not an illegal practice. An individual cannot be blamed for avoiding taxes, however if a person willingly evades taxes, he is liable to pay a huge penalty along with interest or is even penalized with a jail term.

Tax evasion is the practice of avoiding taxes which occurs mainly if the taxpayer shows wrong tax assessment or totally avoids paying taxes. Tax evasion is possible when an individual is running a non-registered business or is selling goods but not providing proper receipts.
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