Income Tax On Farmers: Why is there no tax on farmers in India, is there a need to impose tax now? Know expert opinion

Many people do not know what are the tax rules on farmers. There is no tax on income from agriculture. Under section 10(1) of the Income Tax Act 1961, income from agriculture is tax free. But should they be brought out from the ambit of tax free in the coming times? We are not saying this, but Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council, has expressed his opinion on this issue. He says that in such times there are villages in India which are described as the richest, so it would be wrong for Indian governments not to tax agricultural income. In an article titled ‘Need to tax farmers’ income in India’ published in the New Indian Express, Debroy said it should be up to the respective state governments to decide whether agricultural income should be taxed or not. The Padma Shri awardee economist further said that there is precedent for taxation on agricultural income by states.

Debroy raised the question whether farmers are poorer now than in 1947? This, too, is a rhetorical question. If so, we have Bihar (1938), Assam (1939), Bengal (1944), Orissa (1948), Uttar Pradesh (1948), Hyderabad (1950), Madras and the old Mysore State (1955), Travancore and Cochin Why was the Agricultural Income Tax Act in (1951)? Note that many states in the current geographic structure retain these statutes and their successors. Except in Karnataka, they have not repealed these. They tax certain types of agricultural income, especially plantations.

He also listed several government-appointed committees, including the Taxation Inquiry Commission Report (1953–54), the Raj Committee on Taxation of Agricultural Assets and Income (1972), the Fourth Five Year Plan (1969–74), the Fifth Finance Commission Report (1969), Tax Reforms Committee (1991), Kelkar Task Force on Direct Taxes (2002), White Paper on Black Money (2012) and Tax Administration Reforms Commission (2014) recommended taxing agricultural income. Finally, Debroy raises the question why this proposal only angered people since the 1970s. By the 1960s, he says, there was a consensus that there was a need to tax farmers’ income. The answer, he says, probably lies in the political power that farmers have been able to muster for themselves.