Taxing rich farmers can enhance I-T collections

Very soon, it might become the reality that political parties may even start promoting reduction in taxes as their poll promises to woo middle class and salaried voters - Abhishek Aneja, a New Delhi-based tax expert, tells Bizz Buzz

Widening Tax Base:

•  FM says only 3.7 cr out of 125 cr population file ITRs
•  Experts suggest taxing farmers with over 10 acres
•  Only 3.3% in India are taxpayers as against 8% in China
•  Adding large agriculturists to tax net may shoot figure to over 10% 

Mumbai: Finance Minister Nirmala Sitharaman during her the Union Budget speech on July 23 said that India is largely a tax non- compliant society and pointed out that only 3.7 crore are filing Income Tax Returns (ITRs) in this poor country of 125 crore population.

Following this, a group of chartered accounts (CAs), company secretaries (CSs), cost and management accounts (CMAs) and tax experts, started a campaign on social media that said India is home to 82 crore voters out of which 75 per cent, or 61.5 crore, are farmers. The central government has exempted them from tax net straightaway, but they can also buy cars and bungalows, they pointed out.

Their explanation further goes like this. If farmers are taken out, the balance voters are 20.5 crore. However, 24 per cent of them fall under below poverty line (BPL) category. Therefore, India is home to 15 crore people who are neither farmers nor fall below BPL.

But all these 15-crore people don’t pay taxes as groups like senior citizens, non-working housewives, unemployed youth and below-taxable income earners, in that. This non-tax paying population accounts for a whopping 75 per cent of 15 crore people. That means 11.25 crore people out of 15 crore are out of tax net. That leaves just 3.75 crore who can be categorized as the earning class that can file ITRs. As per the official numbers, they are already doing. Then where is the scope for increasing the real tax base and collections?

Experts suggested for introduction of modest tax on agricultural income on landlords who own 10 acres or more. That way, nearly 26 per cent of farmers will be added to the country’s income tax base.

As on today, 3.3 per cent of Indian population is filing ITRs as compared to 8 per cent of China. If landlords are brought under I-T net, then India’s income tax base will expand to over 10 per cent of the population, they added. The tax collections will also go up, they said.

Talking to Bizz Buzz, Abhishek Aneja, a New Delhi-based CA and a tax expert, said: “I can’t comment on the data presented in the message circulating on social media. However, in the past few years, we have seen a shift to a strict and taxing regime with increase in taxes and penalties.”

He further said: “Treating agrarian income as holier than ‘cows’ is actually distorting the entire perspective of responsibilities to the nation. It’s also exacerbating the already widening disparities and encouraging loophole hunting to avoid taxes or evade more”.

On the other side, taxpayers often complain that despite paying multiple types of taxes to municipal corporations, State governments and central government, there is no improvement in condition of the infrastructure in many cities or any direct benefit like social security scheme prevalent in US, Aneja said

“Very soon, it might become the reality that political parties may even start promoting reduction in taxes as their poll promises to woo middle class and salaried voters,” he observed.

Hariharan MV, former SBI Treasury Head, lamented: “The middle class by the nature of its location in the taxonomy of revenue collections, is sandwiched in the ‘subway’ without any light at the end of the tunnel.”