State with reasons whether the following acts can be considered as Tax Planning or Tax Management or Tax Evasion? (iii) Raja an individual, engaged in business pays his wife as salary ₹15,000 per month. She is an MBA by

Tax Planning, Tax Management, or Tax Evasion: (iii) Raja paying salary to his wife who does not participate in business: This act is a case of Tax Evasion . Reason: Although Raja's wife is professionally qualified (MBA), the crucial fact is that she 'does not take part in his business' and is a 'Housewife'. Paying a salary to a spouse without actual participation in the business is a colorable device to divert income and reduce the taxable profits of the business. The intention is to create artificial income for the wife to utilize her basic exemption limit (₹2,50,000) and reduce Raja's business income. This constitutes an illegal attempt to reduce tax liability by misrepresenting facts and creating a fictitious expense, hence it is tax evasion. The professional qualification of the wife is irrelevant if she does not render services to the business.