Should Agriculture Income be taxed In India?

Recently Niti Aayog member Bibek Debroy said that the income from agriculture should be taxed. But the central government has clarified that it is not considering this proposal at all. This remark of Mr. Bibek Debroy has sparked a public debate on this topic. Let us examine both the aspects of this debate.

India has been an agricultural economy historically even though India had high surplus trade with Romans, Arabs, Egyptians and later Europeans. The primary source of income of kings in India was lagan or chungi (tax) from farmers. There are historical records that kings used to take somewhere 1/3^rd to 1/5^th of total farm output from farmers. The condition of small & marginal farmers was not good historically and British increased the tax on farm output with Permanent Settlement, Ryotwari System and Mahalwari Syatem. These tax systems were so bad that even many big landlords were not able to pay the taxes on time and it led to creation of agriculture land market in India for first time. When landlords & big farmers were struggling to pay the taxes then one could imagine the condition of small & marginal farmers. At some places farmers used to flee from their land as they were not able to pay taxes on time. So the leaders of freedom movement promised farmers that there will be no tax on farm incomes. It was even included in the constitution of independent India. We must remember that farmers still pay land holding taxes but they don’t pay taxes on income from agriculture. First time in Indian history, farmers are not paying any taxes on their farm produce. Even with this incentive and many other incentives the condition of farmers are still worse than their counterparts in other sectors.

The economists are saying that many tax evaders use the agriculture income routes to evade taxes and this loop hole must be plugged. They may be correct but if our tax system is not efficient then this doesn’t mean that state should punish farmers. My counter argument is that majority of business men in India evade taxes and it is a well know perception. I would suggest our economists that they should suggest way to plug that loophole first. The entire tax system needs overhauling. It should be amended such a way that business men & others should not be able to show agriculture income. There should be some sort of mechanism which can distinguish genuine farmer from a bogus farmer. Also economists say that most of the farmers come under the income tax exemption threshold of 2.5 Lakhs so they will not be affected. How a poor farmer will do all the complex calculation of revenue and income? Niti Aayog suggests that farm income could be assessed for tax as a three-year average. Will government give tax concession or tax credit in case of natural calamities? There are many complex problems and who will decide the income of a farmer. We may go back to the British era where tax collectors controlled the life of ordinary Indian farmers.

It is a big shame that even after 69 years of independence, our farmers are forced to commit suicide due to debt traps. I have been born in a farmer family and I have seen the struggles of farmers. These economists will not understand the pain of farmers when farmers loses whole income of 1 years in just one day in case of flood, draught or any other natural phenomena. Farmers are still dependent on Monsoon in India. Doctors want that their offspring should become doctor, politician wants that their offspring should become politicians, businessmen wants that offspring should follow them in business etc. But how many farmers want that their son or daughter should become a farmer? I think this one question states the sorry state of farmers in India. It is high time for Government to reform the agriculture sector. Framers will be happy to pay taxes if their economic condition improves. Bas as of now, taxing farmer income is a bad idea and it may bring disaster for Indian agriculture.