In the central government’s budget, there are different items that are exempted from paying taxes including- deductions, exemptions, rebates, deferrals, special tax rates and credits. These measures collectively are called as ‘tax preferences’. These tax preferences cause revenue loss for the government though they are provided to realize certain other objectives. For example, a tax deduction allowed under personal income tax like section 80C promotes saving habits of the people. The tax policy in India gives rise to a number of tax preferences and they are indirect subsidy to preferred tax payers. Such implicit subsidy payments are also referred to as ‘tax expenditures’. The logic for such a name is because of the argument that these implicit payments should appear as expenditure items in the Budget.
Transparent budgeting calls for inclusion of such outlays (tax expenditures) under the respective programme headings. The logic of describing these tax incentives as tax expenditures is that they are like spending programs embedded in the tax statute. Especially, these measures are like expenditure for the government to realize the set objective like social saving promotion. Tax expenditures are also termed as revenue foregone. In India, the government is preparing tax expenditure or revenue foregone statement Budget 2006-07 and is laid in front of the Parliament. Thereafter, it was placed before Parliament during Budget 2008-09, 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14.