The government has to forgo a staggering Rs 4,18,095 crore as revenue, almost 69 per cent of aggregate tax collected during 2008-09, due to various tax exemptions and relief, including on income tax.
The government had to bear revenue loss to the tune of Rs 39,553 crore due to various exemptions given to income tax assesses on various long term investment schemes like housing loans, insurance scheme, pension etc.
The revenue loss on account of personal income tax exemption was about 6.52 per cent of tax collected under the head.
Exemptions given to corporate sector led to revenue loss of Rs 68,914 crore during the fiscal gone by.
To reduce various exemptions on direct taxes, the government has proposed Direct Tax code, which would replace Income Tax Act of 1961.
Finance Minister Pranab Mukherjee proposed to release draft code within 45 days for public comments.
"The growth in the direct tax revenue foregone is relatively higher than the growth in the direct tax revenues. Accordingly, I do not propose to make any change in the Corporate Tax rates," Finance Minister Pranab Mukherjee said in his Budget speech 2009-10.
Among all the tax heads, maximum revenue loss was in case of customs duty. The loss was almost 37 per cent of total revenue earned through customs.
The revenue loss in the customs duty was Rs 2,25,752 crore during 2008-09.
It was followed by excise duty where revenue loss accounted for 21.16 per cent of aggregate tax collection. The loss in absolute term was Rs 1,28,293 crore.
However, revenue foregone on account of input tax neutralisation or exemption schemes worth Rs 44,417 crore was reduced on account of customs duty.
So far, as indirect taxes are concerned, the government will streamline the structure under the proposed Goods and Service Tax, scheduled to replace excise duty and service tax as well as state VAT from April one, 2010.
