Controversy over farm-tax thickens PDF Print E-mail
Friday, 28 April 2017 05:51
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Debroy’s talk of taxing farm income disowned by Niti Aayog, but it has asked for plugging of this loophole by non-agriculturists



Niti Aayog may not have explicitly asked for taxing agricultural income, as Member Bibek Debroy said on Tuesday, but its Three-Year Action Agenda recommends this, even if not in so many words.


While distancing itself from Debroy’s comments – “the eventual answer … is also to tax the rural sector, including agricultural income” – Niti had issued a press release saying “this is neither the view of the Aayog nor is such a recommendation made anywhere in the Draft Action Agenda document”.


In a sub-head “income tax on agriculture income”, the report says, “All agricultural income is currently exempted from income tax, regardless of its size. While the provision is meant to protect farmers, non-agricultural entities sometimes use it to evade taxes by declaring agriculture as the source of their income. In order to mitigate the generation of black money, the loopholes need to be plugged.”


Ostensibly, this is not a recommendation to taxing agriculture income. But since anyone declaring agriculture income – the loophole Niti seeks to plug – must have a farm in order to be able to do so, the recommendation is tantamount to taxing agriculture income, even if it is exaggerated farm income.


A report by the Standing Committee on Finance cites the instance of 838 cases where agriculture incomes declared in FY07-15 were verified by the taxman. As compared to a declared income of Rs 4.3 lakh crore, the actual was just Rs 1.395 crore. The taxman has to tell the committee whether this ‘data error’ was by the taxpayer or by assessing officers. To begin with, it would be helpful if the taxman released data on how much agriculture income is declared by those in various tax brackets with details of their landholdings.



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