Taxman To Probe 50 Individuals With Suspicious Farm Income
The tax department has been identifying individuals who have high agricultural income.
The taxman will investigate 40-50 individuals with suspicious farm income in excess of Rs 50 lakh each, a senior government official told BloombergQuint.
The Income Tax Department has been identifying taxpayers who have high agricultural and other income, and have finalised the cases from the past three years for scrutiny, said the official requesting anonymity. While the department expects to collect taxes from some of these cases, there will also be some genuine taxpayers as many companies report agricultural income, he said.
An email sent to the Central Board of Direct Taxes for confirmation did not elicit a response.
Farm income is exempt from tax in India. A farmer on an average earns Rs 6,426 a month, according to a National Sample Survey conducted in 2013. In nine years through March 2016, Indians declared $21 billion (nearly Rs 1.34 lakh crore) as agricultural income, according to a Bloomberg report.
The government is verifying if taxpayers who reported farm income of over Rs 1 crore in nine years to March 2016 were genuine, former Minister of State for Finance Santosh Gangwar had said while replying to a query in Parliament on December 6.
More than 4 lakh taxpayers had claimed exemption for agricultural income in the first eight months of year to March 2014, Finance Minister Arun Jaitley had informed Parliament. The top three claimants that financial year were Kaveri Seed Company, Monsanto India, and Mcleod Russel India.
The exemption on farm income has been used by some unscrupulous elements to evade taxes and convert black money into accounted money, Riaz Thingna, director at Grant Thornton Advisory, told BloombergQuint.
To curb these activities, it will be beneficial to investigate such cases on a selective basis after due diligence so that it does not inconvenience genuine cases.Riaz Thingna, Director, Grant Thornton Advisory
According to the response to an RTI (Right To Information) query filed by BloombergQuint, two individuals with suspicious farm income were identified in Katihar, Bihar, and the income tax department has completed assessment and raised a tax demand.
Another response from the department’s Noida office said four individuals with suspicious farm income were identified and taxed. Over 300 responses received from various zone offices replied to these two queries as ‘nil’.
Agricultural income is defined as:
- Any rent or revenue earned from land situated in India, and is used for agricultural purposes.
- Any income earned from such land by agricultural activities including processing of agricultural produce that can be sold in the market.
If individuals have any other source of income, such income is taxed. For example, if a person earns Rs 5 lakh as farm income, and Rs 6 lakh as other income, he will be taxed on Rs 6 lakh.
The right to tax agricultural income is vested with states, and there is no flow of information from the central tax authority to state governments, Indira Rajaraman, former professor at National Institute of Public Finance and Policy, told BloombergQuint. “If information is shared and individuals with agricultural income are investigated, states would be able to tax offenders.”