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No move to tax farm income, clarifies Arun Jaitley
April, 27th 2017

The Centre sought to distance itself from proposals to tax agricultural income, on Wednesday, with Finance Minister Arun Jaitley dismissing any such plans.

“To obviate any confusion on the subject, I categorically state that the Central Government has no plan to impose any tax on agriculture income,” said Jaitley, who is in Moscow, adding that he had read the NITI Aayog Report entitled ‘Income Tax on Agriculture Income’.

The Minister further said that under the Constitutional Allocation of Powers, the Centre has no jurisdiction to impose tax on agricultural income. Agricultural income is exempt from income tax and any move to do so is seen as politically sensitive though many non-agricultural entities take on “farmer” status to avoid paying income tax.

Interestingly, NITI Aayog, the government think-tank, denied any such report and said: “The views on taxing farm income expressed by Member Bibek Debroy were personal and not those of the Aayog.”

It further stressed that taxing farm income is “neither the view of the Aayog nor is such a recommendation made anywhere in the Draft Action Agenda document as circulated to the Governing Council at the meeting on April 23”.

Debroy had opened the topic on Tuesday at a press conference to discuss the Aayog’s three-year Action Agenda and had said taxes should be imposed on farm income above a certain threshold to expand the tax base. “On expanding the base on the personal income tax side, other than elimination of exemptions, is to also tax the rural sector, including agriculture income above a certain threshold,” he had said.

On March 22, Jaitley had also assured Parliament that there was no proposal to tax farm income. In the past, well-off entities claiming agricultural income have, however, been examined by the taxman.

For instance, in March last year, the Central Board of Direct taxes had asked its officials to check the returns of assessees with agricultural income of more than ?1 crore.

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