AGRICULTURAL INCOME SHOULD BE TAXABLE
BY: Arunima Sodhani
It is a well known fact that in India not only do rich farmers enjoy the benefit of not having to pay taxes, but some people go out of their way to show their illegally earned income as agricultural in order to avoid paying taxes. Even well known and respected figures are notorious for stashing away their black money in agricultural income accounts. But alas, it is not black because it is not taxable. To curb this problem, it is high time that the rules be changed, and agricultural income be taxed.
If the government steps up, lets go of agricultural vote banks, and imposes tax on agricultural income, the problem of tax evasion through this route can be eliminated and the money will also add to the exchequer. It will be a huge measure to cork the widening fiscal deficit and will also contribute to infrastructural development of the nation.
As for the farmers, if the existing tax brackets are extended to agricultural income, the average marginal farmer will still enjoy tax exemption as there is hardly any average farmer who earns over Rs.2,00,000 per annum (the income tax exemption limit). Moreover, the taxation of their income will also motivate farmers to invest and save, a concept much required. The may save their income and invest it in non-taxable investment avenues such as to a Public Provident Fund or to a Life Insurance Policy within the framework of section 80C of the Income-tax Act, 1961. Another benefit earned by farmers will be the exemption of tax on housing. Not only will they save their hard-earned money, but the problem of inadequate housing in villages will inch towards being solved. Furthermore, levying tax on farmers income will also give them an incentive to use new agricultural innovations and technologically advanced farm equipment in order to grow better produce, and hence increase their income. The benefit is again two-fold as this will also give the farmers a leverage to increase prices of their produce and earn profits by improving quality.
It is ironical how a law created to benefit the agriculturists of the nation, the founders of the economy, has to lead to a rampant practice of fudging of accounts to damage the economy. The injustice meted out to the honest taxpayer, by not only an extensive but also completely legal exercise is a mockery of the control the constitution rightfully has on this aspect of the financial system.
To prevent this injustice the government must take sound steps towards taxation of agricultural income, albeit slowly due to the sensitivity of the topic, which is partly the reason why the government has turned a blind eye to the issue for the past many years, even though the problem of mega-rich farmers not having to pay taxes is well known. In fact, the person doesnt have to be a farmer to take advantage of this legislation, as even owning farmland on which a rented out residence is built is not taxable.
To introduce such taxation, the government may revise the tax brackets upwards or exempt farmers owning less than a particular size of land from taxation in order to cushion the blow. More steps of this kind may be taken before introducing taxes, but introduce taxes the government must. The evasion on the part of rich farmers (or non-farmers, for that matter) as well as the government has been going on for a long time and it must be put to an end soon. Agricultural income should now become taxable.