Taxing the agricultural income. 

Taxing the agricultural income. 

Why: Taxing agricultural income will bring more people under the tax net. It will help in expanding the Tax Base. India being a low Tax Base country, taxing the rich farmers could be a good way to generate more revenue. 
It will help in curbing tax evasion. Income from businesses, self-employment & other services rendered are shown as agricultural income. 

Problems in taxing the agricultural income:

¬ Majority of the farmers in India are small farmers with marginal land-holdings. So, their income is very less & cannot be brought under tax net. Rich farmers are very less in number. 

¬ Criteria for tax: it cannot be based on land-holdings because majority of farmers are dependent on rainfall for good yield. They do not have any insurance in case of crop failure. Markets do play a role in the end, even if, the yields are good. So, income in agriculture is not only the product of the land size but also the market forces & monsoon

¬ As per the Kelkar Committee report in 2002, 95% of the farmers were below the tax bracket. So, only 5% can be taxed (*which is very less). 

The way ahead:

¬ Tax slab on the lines with Income Tax can be created for agricultural incomes as well. 

¬ Instead of taxing the agricultural income, it is better to provide subsidies based on the income of the farmers i.e. less subsidy or no subsidy to rich farmers. 

¬ Introduction of structural changes in agriculture & allied-sector can help in raising the income of farmers by bringing them under the tax net. 

With Great Love, 

Er. Amit Yadav


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