The government is taking measures to check ultra-rich farmers dodging tax by masking earnings as agriculture income. The A Public Accounts Committee of the Parliament which highlighted lapses in granting blanket exemptions was told the government is working to plug the tax loopholes. Section 10(1) of the Income Tax Act, 1961, exempts agricultural income from taxation.
Any rent or revenue derived from land used for agricultural purposes or any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce. Also any income attributable to a farmhouse subject to satisfaction of certain conditions specified in this regard in section 2(1A).
Super rich farmers in jurisdictions where the farm income exceeds Rs 10 lakh per year limit, will face stricter scrutiny of agricultural income, which is tax-free, said the finance ministry in response to a query by the committee, reported Hindustan Times.
The committee, reportedly, said that tax authorities approved tax -ree claims without thorough verification and vetting documents in about 22.5% of such cases, allowing the possibility of tax evasion.
On Tuesday, the committee released its 49th report titled ‘Assessment related to Agricultural Income’ which is based on a report by the Auditor and Comptroller General of India.
One such case involved tax evasion involving farm income of Rs 1.09 crore on the sale of farmland in Chhattisgarh.
Citing the case, the committee noted the documents tax department did not conduct basic due diligence in ascertaining whether the income was indeed from agricultural activities.
The tax department says it lacks the manpower to check all such cases of fraud. To finance ministry has mechanisms in place to verify claims of exemption where agricultural income exceeds Rs 10 lakh per annum.
