Answer: 

Introduction:

Tax expenditure are concessions and exemptions provided to the taxpayers by the government. Tax expenditures are revenue losses attributable to tax provisions that often result from the use of the tax system to promote social goals without incurring direct expenditures.

Body:

It is called “tax expenditure” because if the government hadn’t given any tax exemptions, this deducted amount would have belonged to the government itself. Though the government is not spending directly, the government is giving back money to achieve certain social goals, like strengthening the housing sector or industrial sector.

Tax expenditures can take many forms. Some result from tax provisions that reduce the present value of taxable income through exemptions, or deductions from gross income. Others affect a household’s after-tax income more directly through tax credits or preferential rates for specific activities.

Tax Expenditure and Budgetary Policies in Housing Sector:

• HRA: Exemptions allowed for deduction of HRA (Income tax).
• Exemptions allowed for interest payment and principal repayment for housing loans.
• First home loan from a bank or housing finance corporation up to Rs. 25 lakh entitled to additional deduction of interest up to Rs. 1.5 lakh. Such a borrower can also claim subsidy under the Pradhan Mantri Awas Yojana Programme (PMAY).
• Subsidy given on various units for the housing sector,

It should be noted that due to these policies of the government, the number of persons who own houses have increased. Moreover, the people can afford to spend on infrastructure as they don’t have to give taxes. All this ultimately results in increased revenue for the government in the long term.

Conclusion:

Thus, tax expenditure is seen as a way to boost development and tax revenue in the long term although it entails lesser revenue at present.

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