The mission of government is to raise income-tax collection by bringing more people in the net of taxs. Government is strictly discouraging taxs evasion. However, an area, where the government can get a quick dividend is agricultural income even without burdening the small and marginal farmers. In India not all farmers are poor. Within agriculture, a diversity of land-holding and income lies. As per the survey conducted by government authorities, it was found that 70% of agricultural households in India have marginal holdings and only 0.4% hold over 10 hectares. While the proportion of agricultural households holding 4-10 hectares of land is 3.7%.
Government is expecting to collect agriculture tax of Rs 25,000 crore, by taxing the incomes of the top 4.1% of agricultural households. This was proposed by the Global Tax Team Lead at the World Bank, Rajul Awasthi. In the previous budget also, the Chief Economic Advisor, Arvind Subramanian had requested the government for taxing the rich farmers.
In India, it is really difficult to consider a farmer as a rich man as we have a mentality that farmers are poor. When you say a farmer, people think that you are going after the poor farmer. But, legally, it is fair to call a rich person as rich regardless of where they get their income. And they should be taxed.
The government’s think tank, Niti Aayog, has also brought the idea of a tax on agricultural income into the limelight. At a press briefing, Niti Aayog stated that the farm income could be assessed for tax as a three-year average. This will widen the taxpayer base.
Conversely, Finance Minister Jaitley had denied to tax agricultural income. In his tweet, he wrote that the government has no plan to impose any tax on agriculture income. He also mentioned that the government has no power to impose a tax on agricultural income.
However, Arvind Subramanian replied the tweet of Finance Minister and said that nothing could prevent state governments from taxing agriculture income. Only the constitutional restriction is on central government taxing agriculture income. He also stated that there is urgent need to make a clear distinction between poor and rich farmer. So that the tax can be imposed on the rich farmers.