Tax Expenditure

Explanation : Suppose a power generating company has tax base of rs 1000 (the value on which tax is applicable), tax is 10 % , but the revenue that goes to govt. pocket is rs 60 (But 10% of 1000 is rs 100) .
Hence Rs 40 is indirect expenditure of govt. to promote power sector.
Here Rs 40 = Tax expenditure .
It is tax exemption on tax rate ( In real language , it is not exemption, as it is the govt. money (Rs 40) which is spend to promote sector) .

Definition : Tax expenditure are revenue losses attributable to tax provisions that often result from use of the tax system to promote the social goals without incurring direct expenditure .

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