AGRICULTURAL INCOME SHOULD BE TAXABLE
BY: Mahimn Sodhani
Punjab is the most developed state in India in terms of agricultural contribution. Ironically, Ludhiana has the highest density of Mercedes Benz cars in India in terms of per capita ownership.
Over 90% of the Indian farmers do not even make enough to fit into the first tax bracket of Rs. 2,00,000 per annum. The rest are driving fancy cars, wearing designer clothes, drinking single malts, living in posh mansions and holidaying in Europe. Should, therefore, agricultural income be taxed? Yes. Very much so. It will not affect the poor farmer but will, the rich.
Nearly 70% of the Indian population derives employment from agriculture. As this income is not taxed, it implies that 70% of our population is not paying taxes. Agriculture contributes to about 30% of the GDP and therefore nearly a third of the GDP is not contributing to taxes either.
A working class man with a white collar job pays nearly a third of his income as tax and a super-rich farmer pays zilch. Farmhouses in Delhi and Haryana are used for recreation, leased out for throwing lavish parties while a quarter (sometimes less) of their land is used for farming but the entire income is deemed agricultural as rent received from agricultural land is also non-taxable, as is income attributed to a farmhouse and therefore zero tax. Poor farmers on the other hand are committing suicide as they dont even have the ability to pay off their loans.
The agricultural sector has become a legal, and often illegal tax shelter for other forms of income. To avoid income tax, transfers from other sectors of the economy to agriculture are commonplace. It is estimated that applying the same tax to agricultural income as in other sectors would yield substantial revenues. Exempting agriculture from taxation imposes a heavy burden on the rest of the economy as well as a significant loss of revenues for the budget. Bringing agricultural income into the tax net after prescribing a minimum exemption limit to address concerns of the small farmer would be a good move to up revenues.
The taxation policy throughout the world is on income- period. Whether the income is derived from agriculture or information technology or accounting is not what decides. Even in the Punjab province of Pakistan, agricultural income tax was levied in 1997 through the Punjab Agricultural Income Tax Act and was amended in 2001 for further taxation on rich farmers.
Dr. K.N. Raj, in 1975, headed the Committee on Agricultural Taxation during the Green Revolution and suggested that agricultural income of the land holding classes should be taxed. The issue is only to identify the well to do farmers, not whether to tax farmers or not.
In the past sixty years, all the committees and agencies appointed by the government regarding this issue have unanimously been of the view that agricultural income should be subjected to tax but the question is who will bell the cat. The lawmakers do not dare to do it because of the vote bank problem. A lot of our countrys politicians are themselves millionaire farmers.
Dr. Ambedkar believed that taxation should be levied on taxation paying capacity or income of a tax payer. I agree.