Sunday, 27 March 2016

Crorepati Farmers: Tax Them Please!

This year's (2016) budget has been termed as a pro-rural budget which has an ambitious plan of doubling the farmer's income by year 2022. Almost everybody would agree that these steps were long due in a country where agriculture is one of the most important industries. Today, India ranks second worldwide in farm output. Agriculture and allied sectors like forestry and fisheries accounted for 13.7% of the GDP (gross domestic product) in 2013 and about 50% of the workforce.

And also let's not forget the plight of the farmers where

  • Farmers are committing suicide as they are not able to recover even their initial investments and plunging into debt.
  • Forced to deal with the 'middle man'.
  • End up receiving meager (leaking) subsidies.

It is an established fact that farmers in India are in poor condition with very low income. Going by that fact, it was very much surprising to know that we also have a section of farmers who are earning in Crores and not paying any taxes.

Agricultural income is tax exempt

In India agricultural income is exempt from tax and it is not even added to your taxable income if you have income from other sources. Some people are taking advantage of this exemption.

CBDT (Central Board of Direct Taxes) enquiry

Drawing reference from the PIL in Patna high court CBDT has asked its officials to verify the genuineness of agricultural income claims exceeding Rs 1 crore made by taxpayers in their income-tax (I-T) returns.

As per TOI report, tax exemption on agricultural income, as declared by taxpayers in their IT returns filed up to November 2014 in the financial year 2013-14 was Rs. 9,338 crore.

Source :

News Nation has made even higher claims -

"The channel got hold of an RTI reply which throws light on the dark world of corruption and fraud in agriculture sector. In 2011-12 nearly 6.50 lakh farmers earned Rs 2 thousand lakh crore (approx) which was much more than the annual GDP of the entire country."

Source :

This information gives rise to a very vallid question

  • Is it a good policy to keep all agricultural income as tax free?
  • What is the problem in applying the income tax slabs as applicable to other sectors, be applicable to agricultural income too?

If a person has multiple sources of income, one being Agricultural Income, then that person has an undue advantage as all of that agricultural income will be tax free. It is not a far-fetched notion but a very realistic scenario. Now-a-days with the vast changes and improvements across all industries and sectors in India, we see many people moving to the cities from villages and pursuing the career of their choice. And most of them still hold-on to their agricultural lands with income being generated from it. Does it make sense to let them have all that income as tax-free?

Contrast it to a person who is living in the city and having a day job and he/ she also works part time in the evening to get some extra income. He/ She is supposed to pay tax on the total income whether it has single or multiple sources. Is that not being unfair?

It can be argued that agriculture is fraught with uncertainties and should be handled differently, with maybe, some special concessions. As in India, the famers depend mostly on the Monsoons. But the uncertainty is evident in every Sector. May not be one dependent on the Nature.
Let's say a middle class salaried person buys a house availing a loan of 35Lakhs from a Bank and he/ she loses the job in next 6 months. So, this job is also an uncertainty. Nobody can take his/ her job for granted or secure it forever.

Same holds true for a Business too. A business is always on an uncertain footing. You don't make profits (or losses) all the time that you are in a business. Yet, businessmen are supposed to pay taxes.
In fact any govt. Trying to do anything for the businessmen will be demonized and hounded as a pro-business, pro-rich Government. It will, for sure, have to suffer the unending taunts and tags from not only the Opposition but from almost everyone else too.

So, would it not be a rational move to bring rich farmers in the tax ambit too. Instead of making it totally tax-free, the Govt. can maybe create separate slabs for Agricultural income. Like, let's say up to 7.5 lakhs is tax free if it is completely from agricultural income and the rest is taxable.

That's all for this topic Crorepati Farmers: Tax Them Please!. If you have any doubt or any suggestions to make please drop a comment. Thanks!

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