17 August, 2009

Tax exemptions cost govt Rs 4.2 lakh cr in 2008-09


The government had incurred an estimated loss of Rs 4,18,096 crore by way of giving tax rebates and exemptions to corporate and non-corporate entities last year, according to the finance ministry. The estimated exemptions included both direct and indirect taxes. The figures for the previous three years were little less but still accounted for more than Rs 2 lakh crore in each year. For instance, in 2005-06 the total estimated revenue foregone was Rs 2,06,700 crore. This rose to Rs 2.40 lakh crore in 2006-07 and Rs 2.85 lakh crore in 2007-08.
The deductions included expenditure on maintenance of persons with disabilities, for payment of medical insurance premia, promotion of higher education, donations for charitable work, etc. The proposed tax code, which is likely to replace the existing Income Tax Act once passed by Parliament, says all business tax expenditure, other than for activities which create externalities, will be withdrawn.
However, the new tax code proposes that non-profit organisations like scientific research associations, news agencies, professional associations, welfare funds, education and medical institutions, religious trusts, trade unions, etc. will continue to get concessional tax treatment.

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