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Widen the tax net to include agriculture

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The NIPFP report has noted that the availability of a large stream of exempted income is a major reason for tax evasion. The report has made a few major recommendations to increase the reach of the taxman to include agriculture — a sector that has by and large remained out of bounds for the taxing authorities at the Centre and in states.

The report has thus suggested that the government should examine whether the definition of agricultural income can be amended to restrict the exemption to basic agricultural operation and processes. In other words, activities where there is a significant amount of value addition after the produce is brought out from the soil can be excluded from the ambit of agricultural income.

Agriculture in India cannot be taxed by the Centre and it is only states that can consider levying income tax on farming. However, no state has ever considered taxing the farm sector's income in view of the adverse political fallout of such a move. But the NIPFP report has underlined the need for taxing income from agriculture and has justified it on the ground that such a move would help curb generation of black money.

Business Standard New Delhi, 04th May 2017

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