If you make money selling crops and renting agricultural land, then you may have to pay no tax at all. (View Highlight)
Go back to the time of the British Raj. The British administration officially began taxing income in 1860 as part of a formal drive to increase revenue. It was also the first time they presented a Budget to the British crown. And lo and behold, they taxed agriculture income. Between 1860 to 1863 and 1869 to 1873, they levied a tax on farmers when their annual revenue exceeded ₹600 a year. (View Highlight)
Now imagine levying an income tax on top of all this. It would’ve been preposterous! Maybe the British felt that way too. And even though the Indian Taxation Enquiry Committee proposed to tax agricultural income in 1925, it never happened. They said there were possible administrative and political hurdles. (View Highlight)
Anyway, by 1935, the power to determine agriculture tax went to princely states and provinces. They had to decide what to do with this contentious subject and they didn’t do much either. Meanwhile, we claimed independence, kicked the British out and let states decide how to deal with agricultural income. And a few states did try taxing this income. The likes of Kerala, Assam, and Uttar Pradesh dabbled with this matter but eventually withdrew it claiming that it didn’t work quite as well. (View Highlight)
Because even back in 1961, prominent economists such as Yogender Alagh were making a case for taxing agricultural income. And agriculture contributed 50% to our GDP. It was a primary source of income and for a young nation like India, this income would have come in very handy. But back then, most people were of the opinion that farmers would struggle with taxation matters. (View Highlight)
And they also believed collecting and monitoring payments would have incurred an even bigger cost. It didn’t seem worth the effort. There was also the fact that India had decided to impose land ceilings — meaning people couldn’t simply buy a lot of land and sit on it. They had caps on what they could own. So authorities believed that most farmers wouldn’t earn a lot of income anyway. (View Highlight)
We have even amended land ceiling acts. Now people and corporations own large swathes of agricultural land. (View Highlight)
Over 86% of agricultural households hold less than 2 hectares of land. And while “total acreage” doesn’t equate to income directly, it’s safe to assume that struggling farmers wouldn’t end up footing a tax bill. Instead, the tax net can capture farmers whose income may add up to tens of lakhs or crores. (View Highlight)
When someone filed a Right to Information (RTI) application a few years ago, they found something really interesting. The land under cultivation in India remained constant. The growth in agriculture as a sector — 3–5%. But the kind of “agriculture income” people declared to tax authorities kept rising through the roof. (View Highlight)
Okay, imagine you’re someone who’s trying to avoid taxes. You have a plot of agricultural land and you’ve built a farmhouse. You rent it out so people could have nice parties. You make money. Now you’re not using the land for agriculture. So the income is actually subject to tax. But then, you use a small part of the land to grow vegetables or fruits. Claim that you’re indulging in some farming. And then you club all this income together and claim a tax exemption. Maybe you’ll also include income you’re receiving elsewhere. It’s a great scheme to avoid paying taxes. (View Highlight)
