Which of the following statements is/are correct ?
Tax expenditure is the revenue foregone by the Government due to
- 1. exemptions under corporation tax.
- 2. deductions allowed on account of accelerated depreciations.
- 3. deductions on export profits earned by the SEZ units.
Select the correct answer using the code given below :
1 only
1 and 2 only
2 and 3 only
1, 2 and 3
Answer is Wrong!
Answer is Right!
This question was previously asked in
UPSC SO-Steno – 2017
1. Exemptions under corporation tax reduce the amount of corporate income subject to tax, thus lowering the tax collected. This is a form of tax expenditure.
2. Accelerated depreciation allows businesses to deduct the cost of assets faster than their actual wear and tear, reducing taxable income in the earlier years and deferring tax liability. This is considered a tax expenditure as it provides a benefit compared to normal depreciation rules.
3. Deductions or exemptions on export profits earned by Special Economic Zones (SEZ) units are specific tax incentives aimed at promoting exports and economic activity in SEZs. These provisions reduce the tax burden on these entities, representing foregone revenue.