India Today - - UPFRONT - —Prosen­jit Datta

Sen­si­ble eco­nom­ics and good pol­i­tics do not al­ways go hand in hand. As an econ­o­mist, Bibek De­broy was right mak­ing the sug­ges­tion that farm in­comes should be taxed. Highly prof­itable com­pa­nies and rich in­di­vid­u­als have used the tax ex­emp­tion for farm in­come to great ad­van­tage. In 2014-15, for ex­am­ple, Kaveri Seed Com­pany showed Rs 186.6 crore as tax-ex­empt farm in­come, while Mon­santo In­dia de­clared tax-ex­empt farm in­come of Rs 94 crore. Dur­ing de­mon­eti­sa­tion, there were ap­pre­hen­sions that many got away by declar­ing the cash they had de­posited as farm in­come. De­broy is not the first to pro­pose that farm in­comes be taxed. Re­cently, two Mem­bers of Par­lia­ment raised the same is­sue. And chief eco­nomic ad­vi­sor Arvind Subra­ma­nian has re­marked that while the Cen­tre can­not tax farm in­come, states can tax rich farm­ers as it is al­lowed un­der the In­come Tax Act. (No state does it, though.)

But tax­ing farm in­come is a po­lit­i­cal hot po­tato. Fi­nance min­is­ter Arun Jait­ley was quick to clar­ify that the gov­ern­ment had no such plan. Niti Aayog also dis­tanced it­self from De­broy’s re­marks, say­ing it was his per­sonal opinion. Farm­ers are a huge vote bank and the av­er­age farmer is pretty badly off. The gov­ern­ment told the Supreme Court on May 2 that about 12,000 farm­ers com­mit sui­cide ev­ery year. Farm in­comes have re­mained stag­nant for many years. While both the prime min­is­ter and the fi­nance min­is­ter have talked of dou­bling farm­ers’ in­comes by 2022, ex­perts see it as a very un­likely prospect.

It need not be an ei­ther/ or, though. The gov­ern­ment could look at the loop­holes in the farm in­come waiver to re­duce mis­use as a first step. Not al­low­ing rich com­pa­nies to claim tax waivers on hun­dreds of crores of farm in­come can be one step. Putting a cap on to­tal farm in­come el­i­gi­ble for tax waiver can be an­other. A re-ex­am­i­na­tion of rules to re­de­fine farm in­come could be yet an­other step. Cur­rently, even trans­fer of agri­cul­tural land is ex­empt, as is hor­ti­cul­ture, while poul­try and dairy farm­ers pay taxes. Poor farm­ers earn too lit­tle to be brought un­der the in­come tax net. But there is no rea­son why rich farm­ers should not pay.

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