Do rich farmers need tax exemptions?
The CAG has found that agricultural income of nearly Rs 500 crore was allowed as exemption in 2017-18 by the income-tax authorities without adequate verification. Of the 6,778 scrutiny assessment matters it reviewed, the CAG found that in 1,527 cases, tax claims were allowed without verification of supporting documents (land records, crop information, invoices etc).
How this man may have been shortchanged
The Tax Administration Reform Commission (TARC) had noted in its 2014 report that agricultural income of 'non-agriculturists' is being increasingly used as a conduit to avoid tax and for laundering funds. That was also the reason CAG chose to focus on the topic.
The TARC had recommended that farmers with agricultural income Rs 50 lakh-plus should pay income tax. Farmers with more than four hectares of land form just about 4% of the total farming families but they corner 20% of the total agriculture income.
RTI makes a point
An RTI reply in 2016 had revealed that the average income of the 8 lakh taxpayers who had declared agricultural income in 2012 was Rs 83 crore. However, in response to a petition in the Punjab and Haryana High Court last year, the Centre said that the decision to levy a tax on agriculture income lies with the state governments and it can impose it only if states pass a resolution under Article 252 of the Constitution authorising the Centre to do it.
What we got
Before the Income Tax Act of 1961 that governs all direct taxes now, the Income Tax Act of 1860 taxed agricultural income till 1886. Former Niti Aayog member Bibek Debroy points out that we have also had state specific acts to tax agricultural income — in Bihar (1938), Assam (1939), Bengal (1944), Orissa (1948), Uttar Pradesh (1948), Hyderabad (1950), Travancore and Cochin (1951) and Madras and Old Mysore State (1955) — and some still have it.
The extended ‘assured income support’ scheme for farmers (PM-Kisan), which was approved by the government in its first cabinet meeting after taking over, will also benefit over eight lakh big landholders — those who own over 10 hectares (nearly 25 acres) of land.
While such landholders account for just 0.6% of farmers overall, their numbers in some states like Punjab (5.5%) and Rajasthan (4.7%) are high.