Agriculture income is exempt from income tax in India under the provisions of the Income Tax Act. It means that income earned by means of agricultural operations is not liable to taxes in India. The reason for this kind of exemption is that the Constitution of India has given power to make laws in connection with agricultural income to the State Legislature. But at the time of computing tax on non-agricultural income, agricultural income is also taken into consideration.
Ill effects of tax exemption of agricultural income:
Fact remains in India not only do the rich farmers enjoy not paying taxes, this fully legal exercise amounts to a mockery of the control the constitution enjoys over the financial system of the country.
For the last many years the agricultural income in India is completely exempt from income tax. A question that now comes in our minds is whether agricultural income should be taxed. Those who are enjoying agricultural income may not like this income to be taxed. But fact remains in India huge expenses are involved for the development of the infrastructure of agriculture. As such for these factors tax on the agricultural income should be imposed in India.
How to prevent this injustice?
In order to check this, the government should take steps to impose tax on agricultural income. The government has not paid any attention to this issue for the last few years, even though the rich farmers are not paying taxes and it is well known to all. Even people owning farmland who are not farmers for the purposes of taking advantage of this provision are renting out residence and their income is escaping taxes.
For introducing such taxation, the government has to revise the tax brackets or exempt only those farmers, owning less than a specific size of land, from taxation. More steps of similar nature should be taken before introducing such taxes. This type of evasion on the part of rich farmers should be put to an end soon. Agricultural income should now be included in the purview of taxes.
Steps that should be taken:
A real bold step is now required in India involving all the political parties and all ministers to discuss the issue of taxation of agricultural income in the country. Reference should be made to the national interest and not personal gain or to any political issue. By the help of this type of debate the policy makers will be able to arrive at a conclusion regarding taxation on agricultural income.
However, if agricultural income in India is subjected to income tax, the poor farmers of India should be kept outside the ambit of income tax as there should be some basic income tax exemption for the poor agriculturists.