Government think-tank NITI Aayog has suggested that agriculture income be brought under the purview of personal Income Tax in a bid to curb tax evasion.
ADVERTISEMENT
In its three-year action agenda, discussed at the Governing Council meeting, the Aayog reasoned that non-agricultural entities sometimes use the blanket relief to evade taxes.
“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,” a senior official told The Hindu.
“In order to mitigate the generation of black money, the loopholes need to be plugged,” the official said.
ADVERTISEMENT
“A key limitation of personal Income Tax regime is the small tax base. In assessment year 2014-15, only 3.65 crore individuals filed returns. Of this group, only 1.91 crore individuals or around 1.5% of the population paid any Income Tax at all,” the official said.
The official added that this situation was not optimal. “Therefore, we should endeavour to bring a large number of citizens into the direct tax net even if their tax liabilities are minimal.”
Widening tax base
Speaking at a press conference, NITI Aayog Member Bibek Debroy said this would widen the tax base and more funds could be made available for the social sector schemes.
“On the personal Income Tax side, exemption should go... also tax rural sector, including agriculture income, above certain threshold,” Mr. Debroy said. There were about 225 million households in India of which roughly 2/3rd were in rural India. Rural India, he said, was effectively out of the purview of all personal income taxation.
Asked about the suggested threshold, he said, “I don’t believe in artificial distinction of rural and urban, so whatever is the threshold on personal Income Tax on urban side, should be the exactly same on rural side.
The three-year agenda, which Niti Aayog Vice Chairman Arvind Panagariya said been prepared through extensive consultation with state governments, enlists 300 specific action points. The document has 7 parts with 24 chapters.
The Aayog has also proposed reduction of fiscal deficit to 3% of the GDP by 2018-19 and the revenue deficit to 0.9% of the GDP by 2019-20.
It has also suggested that high and rising share of NPAs in India’s bank be addressed through supporting the auction of larger assets to private asset reconstruction companies (ARCs) and strengthening State Bank of India-led ARC.
Mr. Panagariya said, “A bad bank is a difficult thing to do... Public-owned ARC is often called the bad bank. Private-owned ARC ultimately can be more effective.”
The Aayog said there was a need to bring down land prices to make housing affordable through increased supply of urban land. This can be done through measures such as releasing the land held by sick units. It has also called for reforming the Rent Control Act along the lines of Model Tenancy Act and promoting dormitory housing.