Time to tax the farms

Against the backdrop of peasants committing suicide in large numbers because of penury, the news about millionaire farmers in India would ordinarily have been dismissed as drivel. But no, there are approximately eight lakh farmers who have declared their income in millions. So should it warm the cockles of the heart of the nation to know that there is a huge upturn in the financial condition of farmers? Is there any technological breakthrough that has revolutionised farming and increased production manifold? No. There is a big scam going on. Union finance minister Arun Jaitley has put it on record that many prominent farmers are being probed for allegedly concealing taxable income as agricultural earnings and asked the Opposition not to term it as political victimisation if their names come out.

The fact is that in the name of agricultural income, which is tax-free, black money is being laundered and taxes are being evaded. Vijay Sharma, former chief commissioner of income-tax, wanted to know under the Right to Information Act, 2005, the amount of earnings made by agriculture. The reply was astounding: Income from agriculture in 2011-12 was Rs 2,000 lakh crore, which was 20 times the gross domestic product of India. Next year (2012-13), it was six times the GDP. All figures were based on that financial year’s declarations made by the so-called agriculturists.

Though most Opposition leaders wanted a thorough probe, Ram Gopal Yadav, a member of the Rajya Sabha representing the Samajwadi Party, warned the government against taxing farm income.

The facts are mind-boggling. More than four lakh taxpayers claimed exemption for agricultural income in the assessment year 2014-15. The biggest beneficiaries were Kaveri Seeds, which claimed Rs 186.63 crore as exemption, and multinational Monsanto India, which claimed Rs 94.40 crore as exemption, and both earned Rs 215.36 crore and Rs 138.74 crore profit respectively before tax. It may be pertinent to mention that agro-companies growing crops are entitled to the same tax relief as individuals in states which impose no tax on agricultural income though some states do tax some kinds of farming.

The Tax Administration Reform Commission report by Parthasarathi Shome in 2014 was scathing: “Agricultural income is exempt from taxation in spite of large agricultural holdings… a large number of rich farmers, who earn more than salaried employees in the cities, get away with paying no tax in view of the government’s lack of will to consider an agricultural income-tax.” It further said, “Agricultural income of non-agriculturists is being increasingly used as a conduit to avoid tax and for laundering funds, resulting in leakage to the tune of crores in revenue annually.”

The Economic Survey 2016 also recommended that taxing large agriculturists would help widen taxpayer base beyond the current 5.5 per cent, or 39 million earning individuals, who pay tax. The percentage of taxpayers in Singapore is 39 per cent, US 46 per cent and New Zealand 75 per cent.

The problem is that instead of widening the tax net, the government is imposing more and more taxes on the 5.5. per cent who pay taxes. This is a kind of tax terrorism. Honest taxpayers suffer while the dishonest invent ways to hoodwink the state. The income-tax department is aware of the fraud going on. The Central Board of Direct Taxes, in a white paper on black money released in May 2012, categorically pointed out: “Giving credit to agricultural income for income-tax purposes without verification of claim allows an avenue for bringing black money into the financial system as agricultural income.” The question arises, what did the department do to unearth the black money?

If an honest probe is conducted, it will debunk many industrialists, political leaders and bureaucrats who are self-styled farmers. These so-called farmers either show proof of their ancestral properties in villages or buy some agricultural land and obtain forged receipts of agricultural produce having been sold to traders. Since affluent people buy agricultural land, its price goes up several notches and ordinary farmers are badly hit as they cannot afford to buy it. They also damage the country as they hardly cultivate anything and the land remains unused since their purpose is not to cultivate, but to launder black money. So-called farmers from big cities like Delhi, Kolkata, Mumbai, Chennai, Hyderabad, Bengaluru and Pune claimed tax exemption of over Rs 10,000 crore in 2013-14 though one wonders how much cultivable land there is in these cities.
After the enforcement of land ceiling act in different states, the land holding has come down drastically. With small holdings it is well-nigh impossible for genuine farmers to extract crores from the land.

Agriculturists need to be protected in order to protect agriculture. But agriculturists have to be sifted from pseudo-agriculturists. A huge scam has been going on in the name of annadata. It cannot be without the connivance of income-tax officials. There are provisions in the Income Tax Act, 1961, to punish those misrepresenting their income.

It may be clarified that pure agriculturists who have no other means of income do not file income-tax returns. It is only those having some other sources of income besides agriculture who file returns. So, it is all the more alarming why the assessing officers of the I-T department accepted their claims without any investigation when even a dunderhead would smell a rat. It is an irony that a relief given to peasants in order to promote agriculture is being abused like this.

It is not only a case of tax evasion but also of forgery and fraud for which there should be separate prosecution. The probe should also cover the role of income-tax officials. Rather, the I-T department should initiate vigilance inquiry against concerned officials suo moto. If taxes are paid on the exemptions claimed, it may lead to tax holiday for a few years.