Why Did Govt Forego ₹99,000 Crore in Corporate Tax Revenue?
As per a written reply by the Ministry of Finance in July 2025, the government forewent ₹99,000 crore in corporate tax revenue in FY24. This was not a leak or loss—it was a deliberate policy choice. Let’s break down what this means and why it matters.
What Is ‘Corporate Tax Revenue Foregone’?
The term corporate tax revenue foregone refers to potential tax collections the government waived through exemptions, rebates, and lower tax regimes. These are not illegal losses but structured incentives—often aimed at boosting investment and ease of doing business.
Key Reasons for Corporate Tax Revenue Foregone in FY24
Based on the MoS Finance’s disclosure and expert analysis, here are the primary drivers:
1. Optional 22% Tax Regime under Section 115BAA
- Introduced in September 2019, this regime allows domestic companies to pay tax at 22% (effective 25.17% with surcharge and cess), provided they don’t claim most deductions.
- It led to a significant shift in taxpayer base from old regime to the new one.
- The Revenue Foregone due to this: ₹72,522 crore in FY24.
2. 15% Tax for New Manufacturing Cos (Section 115BAB)
- To promote ‘Make in India’, companies incorporated after 1.10.2019 and commencing manufacturing before 31.3.2024 were eligible for a 15% base tax (17.16% effective).
- This created a competitive edge globally but reduced immediate tax inflows.
- Estimated foregone revenue: ₹13,000–15,000 crore.
3. Exemptions to Specific Sectors
- Units in SEZs (Section 10AA), infrastructure (Section 80-IA/IB), R&D (Section 35), and others continue to avail old exemptions.
- Though fewer companies use this route post-115BAA, the revenue impact persists.
Comparative Tax Foregone (Past 3 Years)
| Financial Year | Revenue Foregone (₹ Crore) | Major Reason |
|---|---|---|
| 2021–22 | 1,03,285 | COVID incentives + 115BAA uptake |
| 2022–23 | 1,01,034 | Manufacturing boost under 115BAB |
| 2023–24 | 99,000 | Matured shift to new regimes |
Source: MoF Written Replies, Union Budget Statements
Is This a Loss or an Investment?
While ₹99,000 crore seems huge, the government views this as “revenue sacrificed for long-term growth”. According to the 2025 Economic Survey:
- India’s corporate tax-to-GDP ratio has stabilised.
- Private capex is picking up, partly due to tax predictability.
- Tax Buoyancy (growth of tax vs GDP) has remained around 1.2, indicating healthy compliance.
Expert Insight:
“The 22% regime is no longer a ‘discount’—it’s the baseline. Revenue foregone today could become revenue earned tomorrow if the tax base expands.” – Senior Partner, EY India
Legal Backing & Official Sources
- Section 115BAA and 115BAB were inserted by the Taxation Laws (Amendment) Act, 2019.
- The revenue foregone figures are published in the Expenditure Budget Vol. I and confirmed in Rajya Sabha replies (July 2025).
- CBDT reports also track regime-wise opt-in and its revenue effect.
(Official source: https://www.indiabudget.gov.in)
What Should Taxpayers Know?
- No action required for individual taxpayers.
- Businesses should evaluate tax regimes yearly (old vs 115BAA/115BAB).
- Startup founders and manufacturing units should consult CAs for choosing the right tax route before filing Form 10-IC or 10-ID.
Final Thoughts
Corporate tax revenue foregone is not a loophole—it’s a strategic tax policy move. While it reduces short-term inflows, it is designed to make India an attractive business destination with a stable, lower tax regime.
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FAQs on Corporate Tax Revenue Foregone
Q1. Is the foregone amount due to tax evasion?
No. It is due to policy-based tax cuts and optional lower regimes.
Q2. Can a company shift from old to new regime anytime?
Yes, but with conditions. Once you opt for Section 115BAA, you cannot go back to the old regime.
Q3. Does lower tax mean lower compliance?
Not necessarily. In fact, lower tax rates have improved corporate tax filing compliance as per CBDT.
Summary
The govt forewent ₹99,000 crore in corporate tax revenue in FY24 due to lower tax regimes under Sections 115BAA and 115BAB. This was a strategic move to boost investment, not a loss. Businesses must evaluate tax benefits before choosing regimes.