---
title: "Tax Elasticity: Meaning & Formula | Model Diplomat"
description: "Tax elasticity measures how tax revenue responds to income growth without rate changes—distinct from tax buoyancy. Key concept for UPSC GS3 fiscal policy."
url: "https://modeldiplomat.com/learn/glossary/tax-elasticity"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- Tax elasticity measures the percentage change in tax revenue arising from a one percent change in national income, holding tax rates and structures constant.
- How does tax elasticity differ from tax buoyancy?
- What does a tax elasticity value greater than one indicate?
- How is the revenue series cleaned to estimate elasticity?
- Why did GST introduction in 2017 affect elasticity estimates in India?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

Tax elasticity measures the percentage change in tax revenue arising from a one percent change in national income, holding tax rates and structures constant.

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India's Fifteenth Finance Commission, in its 2020 report, used tax elasticity and buoyancy estimates to project the central divisible pool and recommend the 41 percent vertical devolution share to states.

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