NITI Aayog moots taxing agriculture income

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.

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.

“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.

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