Myth of tax-free agriculture income
The tax-free status of agricultural income has been a contentious issue amongst the urban middle class of India for a long time. The issue is raked up every year close to the budget presentation. It is also commonly used as an argument against farm subsidies, MSP, and other farm sector reforms. In my view, the whole debate and discussions around the taxation of agriculture income in India amongst the urban middle class is driven by misunderstanding and ignorance about agriculture economics in India. Constitutional status of the Agriculture Income It is important to understand the constitutional and legal status of the agriculture income in India, before discussing the taxation aspect. · Agriculture is a state subject as per the Constitution of India (Entry 46 in the State List of Schedule VII). The power to tax agriculture income vests in the respective state government. The central government cannot tax agricultural income. A few...