Navigating The Green: Taxation Of Agricultural Income In India

Aryan Jain, BML Munjal University, Gurugram

ABSTRACT

Agriculture is one of the most widely practiced occupations of our country that employs the major working force of the economy. However, it is one of those sectors that has remained as the hardest to tax sector of the economy and thus taxation of agricultural income in India has remained a long-standing debate in its economic history, which has drawn the attention of various policy analysts and economists in the recent times. While the economists and various governmental commissions have assessed and argued for the levy of taxes on agricultural incomes in India on the basis of equity and efficiency concerns. Yet the Taxation of agricultural income has received scathing criticism and has been inextricable till date. The grant of taxation free agricultural income without any checks and balances has given rise to unequitable distribution of income and thus requires immediate and effective implementation. The continued under taxation of the agriculture sector in India has led to the problems of avoidance and evasion of taxes and will seriously distort the economy eventually. Even though the implementation to tax agriculture income is a cumbersome task and requires extensive legislative and political exercise, however, once implemented it can generate sizeable income for the government which in turn can be used to create public infrastructure or to lower the prices of essential public goods. Therefore, this paper provides an economic analysis of law wherein it shall seek to explain the need of a robust taxation regime for agricultural income with uniform application, while examining the economic issues and solutions thereof that would yield efficient outcomes in taxation of agricultural income and therefore, the paper suggests a blanket tax regime based on the current taxation regime of individual taxpayers i.e., based on progressive threshold values of income.

Keywords: Agricultural Income, Taxation, Externality, Equity, Efficiency, Threshold.