The Union Budget presented by finance minister Arun Jaitley dwelled extensively on the low taxpayer base in India but did not once mention taxing agricultural households — one of the most crucial pieces of this missing taxpayer base.
In doing so, Jaitley has chosen to again ignore the suggestion made by chief economic adviser Arvind Subramanian who had suggested in last year’s economic survey that taxing the well-off in the agricultural segment would help increase the taxpayer base.
India has not taxed agriculture since the country became independent in 1947.
Taxing farmers was always seen as the trademark of colonial oppression and after Independence, India decided not to tax agricultural income.
Almost 70 years since, the Indian political class and the government are still wary of taxing at least agricultural income, even if it is only that of big farmers and companies who earn crores in agricultural incomes.
In the period between 2007-08 and 2015-16, an estimated 2,746 entities and individuals each declared agricultural income of at least Rs 1 crore.
According to government estimates, of the 250 million households in the country, around 150 million are agricultural households, which means the government has to target the remaining 100 million households to increase the taxpayer base.
Jaitley, in his budget speech, pointed out that India is largely a tax non-compliant society. He contrasted taxpayer data with consumption patterns to justify this claim.
“The number of people showing income more than Rs 50 lakh in the entire country is only 1.72 lakh. We can contrast this with the fact that in the last five years, more than 1.25 crore cars have been sold, and number of Indian citizens who flew abroad, either for business or tourism is 2 crore in the year 2015,” Jaitley said.
And at least some of them are “farmers”.
In a debate in Parliament last year, when some members of Parliament belonging to the Biju Janata Dal and Trinamool Congress had raised the issue of big companies earning crores in tax exempt agricultural income, the finance minister firmly stated that the government has no plans to tax agricultural income.
However, the tax department has sharpened scrutiny on cash deposits made in the aftermath of demonetisation of Rs 500 and Rs 1,000 banknotes focussing on deposits that are being passed off as agricultural income but are in reality from non-agricultural sources.