Tax on agricultural income: Arun Jaitley says Modi government has no such plan

Finance Minister Arun Jaitley today said the Modi government does not plan to impose any tax on agricultural income, dismissing the suggestion of NITI Aayog member Bibek Debroy.

"I have read the paragraph in Niti Ayog Report entitled 'Income tax on agriculture income'. To obviate any confusion on the subject, I categorically state that the Central Government has no plan to impose any tax on agriculture income. As per the Constitutional Allocation of Powers, the Central Government has no jurisdiction to impose tax on agricultural income," Finance Minister Arun Jaitley said in a press release.

The Finance Minister denied any plans of the government to impose agricultural income on Twitter too:

 

FM @arunjaitley : I categorically state that the Central Government has no plan to impose any tax on agriculture income .

- Ministry of Finance (@FinMinIndia) April 26, 2017

The minister further clarified that as per the Constitutional allocation of powers, the Centre has no jurisdiction to impose tax on agricultural income.

FM @arunjaitley :As per the Constitutional Allocation of Powers, the Central Govt has no jurisdiction to impose tax on agricultural income.

- Ministry of Finance (@FinMinIndia) April 26, 2017

Jaitley had earlier on March 22 assured Parliament: "Agriculture income is not taxed and will not be taxed." In this year's budget, the government had reduced personal income tax from 10% to  5% for people with income in the slab of 2.5 lakh to 5 lakh.

Meanwhile, government think-tank NITI Aayog has distanced itself from the comments made by its member Bibek Debroy on taxing agriculture income saying that views expressed by him were 'personal'.

"The NITI Aayog categorically states that this is neither the view of the Aayog nor is such a recommendation made anywhere in the Draft Action Agenda document as circulated to the Governing Council at the meeting on April 23, 2017," the statement said.

On Tuesday, Bibek Debroy had said taxes should be imposed on farm income above a certain threshold to expand the tax base.

"On expanding the base on the personal income tax side, other than elimination of exemptions, is to also tax rural sector, including agriculture income above certain threshold," Debroy had said.

Most farmers in India are poor, but the tax loophole has been exploited by some. Also, taxing agricultural income is a politically sensitive issue and successive governments have refrained from doing so.

NITI Aayog, meanwhile, has released a draft three-year "Action Agenda", to be followed by a seven-year "Strategy" and a 15-year "Vision" for India's development.