1

In India, which class or group of people are not liable to income tax ?

2

HINT

3

Whether not taxing people

from agricultural sector is

right or wrong ?

4

AGRICULTURE INCOME: SHOULD IT BE TAXED ?

By

- Radhey rathi

5

PRESENT SCENARIO

Exempt under the Income Tax Act.

Exclusive power given by the Constitution to make laws in relation to taxes levied on agricultural income.

6

OTHER REASONS ( MAIN REASONS)

India being a developing country, maximum number of people in agricultural sector

Main Vote bank for political parties

7

REASONS FOR NOT TAXING AGRICULTURAL INCOME

Sector in bad shape Many farmers leaving this sector Suicides Unreliable weather Lower prices offered by middlemen and

traders

So, the government does not want to curse farmers more by levying taxes on them.

8

Do you all really believe that farmers are in a bad condition ?

Do you feel that all farmers have to struggle a lot to make both ends meet ?

10

11

REAL SCENARIO

Large number of farmers are immensely rich.

Evident from sale of 1500 luxurious cars like Mercedes, Audi and BMW in Punjab ( an agriculturally driven state)

Hardworking salaried people and businessmen feel depressed when they see that these rich farmers are not liable to pay any income tax

12

FOR/AGAINST TAXING THE

AGRICULTURAL INCOME

India, a developing nation, hence large amount of expenditure is required for proper development of infrastructure.

Suicides of farmers – not a point to be considered here. Rather government should analyze the reasons behind it.

13

A wrong belief that this will deplete funds and resources available with poor farmers.

As per the recent budget, income up to Rs. 2,50,000 is exempt from income tax.

Hence, levying of income tax will not deplete funds and resources of poor farmers. Only rich farmers would be liable for income tax.

14

ANOTHER BENEFIT TO FARMERS

Income tax to be levied as per the land holding pattern. Example –

3 people in a farmer’s family. Assume land is equally distributed in their name.

So, income of Rs. 7,50,000 ( i.e. Rs. 2,50,000*3) would be exempt.

This is not the case with a salaried person with 2 members in the family.

Hence, for a non-agricultural family, exemption limit would be only Rs. 2,50,000.

15

BENEFIT IF LIABILITY ARISES

Farmers will start investment by way of PPF or NSC, which has two benefits, namely :-

1. Such an amount can be claimed as deduction.

2. Habit of saving would be inculcated, which will lead to bright future of farmers as well as of India as a whole.

16

HISTORY

All agencies and commissions set up in last 65 years unanimously believe that there should be income tax on agricultural income.

Some eminent people who feel that Agricultural income should be taxed :-

1. Dr. K N Raj, an eminent economist who served as advisor to prime ministers like Pt. Jawaharlal Nehru and P.V. Narasimha Rao.

2. Dr. Ambedkar

Even Taxation enquiry Commission set up in 1953-54 was of the same view.

17

WHAT IS AGRICULTURAL INCOME ? As per IT Act, any income from the following

three sources is considered as agricultural income :-

1. Any rent received from land which is used for agricultural purpose.

2. Any other income derived from such land by agricultural operations including processing of agricultural produce.

3. Income attributable to a farm house ( subject to some conditions as per Income Tax Act)

18

PRE REQUISITE CONDITIONS

The following conditions have to be sufficed in order to consider an income to be an agricultural income :-

1. There must be land.2. The land is being used for agricultural purposes3. Land cultivation is must4. If rent is received, then to assess that rent

income as agricultural income, there should be agricultural activities on that land.

5. Income of farm house is considered as agricultural income only if farm house is built on that land and it is used as a store house.

6. Ownership of land is not essential.

19

Is agricultural income really not taxed in

India ?

20

No, it is indirectly taxed.

21

INTEGRATION OF INCOMES

If Agricultural Income > Rs. 5,000Or

If Non agricultural income > Rs. 2,50,000 (basic exemption limit), then

Follow the following steps to calculate total tax liability

22

Step – 1 – Total Income = Agricultural income + Non Agricultural Income

Step – 2 – Calculate tax liability on Total income (Step -1)

Step – 3 – Add Basic exemption limit to the agricultural income

Step – 4 – Calculate tax liability on amount calculated in Step – 3.

Step – 5 – Deduct amount of tax calculated in Step – 4 from tax liability as per Step – 2.

Step – 6 – Add education cess and secondary and higher secondary cess to it.

Step – 7 – Total tax liability = Step – 5 + Step – 6

23

E.g. For the PY 2013-14, Mr. X has agricultural income of Rs. 2,50,000 and salary income of Rs. 7,50,000.

Here, Total income = Agricultural income + Non-agricultural income

= Rs. 2,50,000+ 7,50,000

= Rs. 10,00,000

Tax on total income = Rs. 2,00,000

Agricultural income + Basic Exemption limit= Rs. 2,50,000 + Rs. 2,50,000 = Rs. 5,00,000

Tax on Rs. 5,00,000 = Rs. 1,00,000

24

Hence, tax liability = Rs. 2,00,000 – Rs.1,00,000

= Rs. 1,00,000Add: Edu. Cess and S&H edu. Cess = Rs. 3,020= Total Tax liability = Rs. 1,03020

Tax on only NON AGRICULTURAL income of Rs. 7,50,000

= Rs. 75,000

Indirect tax on agricultural income = Rs. 25,000 (Rs. 1,00,000 – Rs, 75,000)

25

Why not tax agriculture income

directly ?

26

Thank you