Should Agriculture Sector Be Taxed?

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hould agriculture be taxed in India?

India, not by plans but by default is a mixed economy often leading to a conflict between what the state and the corporate demand. One of the many decisions resting with the government is that of taxation. Indian agricultural income, with the motive of promoting agriculture is currently exempt from income tax. 

In my opinion, agricultural income should be taxed like any other business income even in an agri-dominated country like India. The largest segment of the economy should not be left out of the tax net on the pretext that they grow food for the country. If a farm shows a profit it should be subject to corporate or at least lesser tax rates. A major chunk of Indian farmers are fragmented and have small land holdings. These incomes would anyway fall below the exempted threshold and hence there is no question of impacting the livelihood and employment. It is people earning above the exempted limit and not paying taxes only because the nature of business is supportive of agriculture who should be thought about. Both in Agriculture and other types of businesses, the motive remains profit. I see no reason why one should be left out of the tax ambit.  

The irony is that about one third of the parliament members are landlords holding hundreds of acres of agricultural land. Keeping the sector untaxed only indicates that 19% of the Indian GDP would still be untaxed and farmers earning billions of ‘green income’ would contribute zero to the country’s tax revenues. What worsens it further is the proposed subsidy bill of about $24 Billion which is being given out to these farmers, further adding to the income of the landlords. This dolling out of billions of rupees of subsidy on the agriculture sector is with a view to support the small farmers and help boost their incomes hoping for a high production. But, in reality it is the big landlords who have been the real beneficiaries in the name of small farmers and have contributed zilch to the national exchequer.

In many countries, any produce taken from the farm is considered as benefit in kind, not very different from a company car. In fact, it is the talked about introduction of an inheritance tax that will hinder agricultural growth and make it impossible for the heir to continue farming after the farm is passed on to them. This is the tax that is unfair to the farmer, not income tax. 

I fail to see why a person with an agriculture business should not pay for roads and infrastructure which is most needed in any agricultural area to ensure distribution which also happens to be a reason for price fluctuations of agri based commodities. Taxing agriculture could be the beginning of a rationalisation at a macro level, no matter what the political fallout is.   

income be taxed in India
Feb 20 2013, 22:14   |   By Moneycontrol.com
(12) Comments Email Print

Subhash Lakhotia
Tax Guru : CNBC Awaaz, Tax & Investment Consultant
For the last so many decades the agricultural income derived in India by tax payers of India is completely exempt from income-tax. A question now crops up in our minds is whether such agricultural income should be taxed right now. Those who are deriving the agricultural income will surely not like this income to be a part of the taxable income. But the fact remains that in a country like India where huge expenditure is still required for the development of the infrastructure and also because of the fact that the GDP ratio is not in tune with the desired benchmark and keeping all these factors in view, I strongly feel that it is time now to tax the agricultural income of the agriculturists in India.  Substantial revenue will be collected by the Tax Department in case agricultural income is subjected to income-tax. However, the problem in India is that because of the politics of vote bank no government can dare to touch this subject matter namely of taxing the agricultural income of the agriculturists...
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