From FY20 to FY24, the revenue forgone due to tax incentives for individuals and Hindu undivided families stood at Rs 8.7 trillion, significantly higher than the Rs 4.53 trillion forgone for corporations.
The restructuring of corporation-tax rates in 2019 has given the impression that the government is giving concessions to companies while individuals have been left in the lurch.
However, the data on the revenue forgone since 2019-2020 (FY20) belies this perception.
From FY20 to FY24, the revenue forgone due to tax incentives for individuals and Hindu undivided families stood at Rs 8.7 trillion, significantly higher than the Rs 4.53 trillion forgone for corporations. (The figures for FY24 are projections.)
This trend holds true for each year since FY19.
The revenue foregone due to tax incentives to corporations was much higher at Rs 1.08 trillion in 2018-2019, a year before the corporation tax overhaul, than the Rs 95,000 crore (Rs 950 billion) given to individuals.
In FY20, the government reduced the corporation tax rate from 30 per cent to 22 per cent, including cess and surcharge, a move that was intended to boost investment and economic growth.
Besides, tax concessions were given to the companies establishing fresh manufacturing units by cutting their rate to 15 per cent.
This concession was initially available to those that set up units by 2022-2023. This was later extended by a year.
Govinda Rao, fiscal expert and former director of the National Institute of Public Finance and Policy, attributes higher revenue forgone for individuals to the concessions under the old tax regime.
"The concessions are obviously much higher since people who have opted for the old tax regime receive many tax benefits," Rao said.
However, he noted these benefits were limited to around 25 million people.
Meanwhile, the Budget for 2025-2026 announced those earning up to Rs 12.75 lakh in a year would not be taxed under the new tax regime but that does not allow for deductions under home loans.
There are also tweaks in tax slabs for others under this tax regime.
"The new tax concessions will only help those at the margin, and these concessions will not significantly boost consumption," Rao said.
Arun Kumar, former professor of economics at Jawaharlal Nehru University, is of the same opinion, stating that the extent of concessions given to individuals is significantly higher, which explains the greater revenue forgone.
"Corporations receive many other benefits as they misclassify their claims, which is not reflected in the tax data and is essentially part of the black economy," Professor Kumar explained.
In a recent written reply to Parliament, Finance Minister Nirmala Sitharaman stated the revenue impact on account of concessions to individuals and Hindu undivided families was almost double that of incentives of 'corporate'= taxpayers.
Feature Presentation: Aslam Hunani/Rediff.com
© 2025