Which of the following statements correctly describes the meaning of a tax shelter ........

Indian Economy (Easy) Budgeting and Fiscal policy

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Which of the following statements correctly describes the meaning of a tax shelter?

A country or independent area where taxes are levied at a low rate.

Any technique that allows to reduce or avoid tax liabilities without violating law.

The government giving tax exemptions to foreign nationals.

A financial arrangement used by individuals to illegally avoid tax liabilities.

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Explanation:

Tax shelters are any technique used by taxpayers to minimize or decrease their taxable incomes and, therefore, tax liabilities. It allows to legally reduce or avoid tax liabilities. Tax shelters can range from investments or investment accounts that provide favorable tax treatment, to activities or transactions that lower taxable income.