Union Finance, Defence and Corporate Affairs Minister Arun Jaitley has categorically dismissed any prospect of the government bringing agricultural income into the income tax net, a day after the Centre’s think tank NITI Aayog mooted the idea .
“I have read the paragraph in NITI Ayog Report entitled ‘Income tax on agriculture income’. To obviate any confusion on the subject, I categorically state that the Central Government has no plan to impose any tax on agriculture income,” Mr. Jaitley said in a statement.
“As per the Constitutional Allocation of Powers, the Central Government has no jurisdiction to impose tax on agricultural income,” he added.
Mr. Jaitley’s swift clarification to the NITI Aayog proposal is being seen as an attempt to nip in the bud any potential controversy on a sensitive issue pertaining to farmers and rural India.
The NITI Aayog as part of its three year action plan for the country, had recommended a review of the tax exemption on agricultural income. The proposal was circulated during Sunday’s meeting of the Governing Council of the think tank chaired by Prime Minister Narendra Modi and includes all Chief Ministers.
The Aayog has reasoned that non-agricultural entities sometimes use the blanket relief to evade taxes.
“On the personal income tax side exemption should go... also tax rural sector, including agriculture income above certain threshold,” said Aayog member Bibek Debroy on Tuesday, pointing out two-thirds of the 225 million households in India are in rural India, which is effectively out of the purview of all personal income taxation.
“All agricultural income is currently exempted from income tax regardless of its size. While the provision is meant to protect farmers, non-agricultural entities sometimes use it to evade taxes by declaring agriculture as the source of their income,” an Aayog official had said on Tuesday, terming it a loophole in the war against black money.
