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Tax on Agriculture Income Part of Niti's Action Plan


Threshold for taxing agriculture income should be same as urban income, says Bibek Debroy
Agricultural income should be taxed at the same threshold as personal income, Niti Aayog, the government's thinktank, has proposed in its draft three-year action plan.
Farm income could be assessed for tax as a three-year average, Niti Aayog member Bibek Debroy said at a press briefing on Tuesday, making a case for widening the taxpayer base.
“There should be no distinction between urban and rural. The threshold for taxing rural agriculture income should be the same as urban income. However, rural agriculture income taxed could be an average of three years as it is subject to weather fluctuations,“ Debroy said, explaining the Aayog's proposal to expand the country's tax base.
The government plans to do away with personal income tax exemptions, an exercise that's already under way for corporate income. However, taxing agricultural income would require an amendment to the Income Tax Act and cannot be purely an executive decision.
Under new income tax slabs announced by finance minister Arun Jaitley in the budget this year, income up to Rs2.5 lakh is exempt from tax, while 5% is imposed on income between Rs 2.5 lakh and Rs 5 lakh. The tax on income between Rs 5 lakh and Rs 10 lakh is 20% plus Rs 12,500, while above Rs 10 lakh it is 30% plus Rs 1,12,500.
Prior to Niti Aayog's recommendations, chief economic adviser Arvind Subramanian had suggested in the Economic Survey that taxing the well-off in the agricultural segment would help widen the taxpayer base. India's political leadership has refrained from taxing agriculture since Independence in 1947 as taxing farmers was seen as a sign of colonial oppression.
Between 2007-08 and 2015-16, an estimated 2,746 entities and individuals each declared agricultural income of at least Rs 1 crore.
The Aayog has suggested in its draft three-year action plan that the government tackle tax evasion, expand the tax base and simplify the tax system through reforms such as consolidating customs duty to a unified rate.
“We are proposing a unified customs duty at 7% with some exceptions,“ Aayog vice chairman Arvind Panagariya said.
The draft plan was unveiled to states at the third governing council meeting on Sunday. It replaces the decades-old five-year plans and hopes to transform the planning process in the country.The Aayog has identified over 300 specific points covering the who le gamut of sectors where executive action can bring about significant transformation.
The period of the action agenda (2017-18 to 2019-20) coincides with the period of the 14th Finance Commission's award, providing enough stability to the funding estimates of both the Centre and the states.
Since the government has done away with five-year plans from April 1, the three-year action plan must be put into place at the earliest to guide central ministries, departments and states to achieve goals envisaged in the `Vision 2030' document.
In May 2016, the Prime Minister's Office directed Niti Aayog to come up with a 15-year vision document for the period up to 2031-32. This would be complemented with a seven-year strategy starting 2017-18 to convert the vision document into implementable policy and action as part of the National Development Agenda and a three-year draft action plan.
Drawing inspiration from the Prime Minister's vision to transform India into a prosperous, highly educated, healthy, secure, corruption-free, energy-abundant, environmentally clean and globally influential nation by 2031-32, the action plan has outlined executive actions across social sectors, industry and services, energy, job creation, skill development, transport and digital connectivity, governance, taxation, judiciary, environment and water resources.
The Economics Times New Delhi, 26th April 2017

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