The objective of all three methods is to reduce tax liability, but the means of achieving that is different in all three cases. Tax planning is reducing the burden through various deductions and exemptions under the various provisions of the tax laws of the government. Tax avoidance means benefitting from the loopholes of the tax laws to reduce the tax burden. Although tax avoidance is legal, it defeats the very intent of the legislature by entering into transactions to avoid taxes. Tax evasion is an illegal way of resorting to various types of deliberate manipulations to show the income as lower than the actual. Inflation of expenses and deflation of income are the conventional ways of tax evasion.