Archive for September 5th, 2010

Is the system of taxing agricultural income in India just and fair?

Posted on September 5, 2010. Filed under: Direct Taxation |

THE poor Indian farmer battles many hardships around the year. While there may not be an instant remedy for the travails of monsoon and market economics to make the farmer suffer for a legal malaise should be discredit to the constitutional process. Section-10 of the Income Tax Act, 1961 exempts ‘agricultural income’ from levy of tax. The rationale behind such exemption appears prima facie in support of a majority population (mostly very poor) feeding on agricultural produce and lauds the constitutional mandate under item 82 List I of the Seventh Schedule. However, the respective State Governments have been allowed to levy tax on ‘agricultural income’ under the aegis of Item 46 List II of the same constitution. To compound the irony, the definition and meaning of ‘agricultural income’ is contained in section-2(10) of the Income Tax Act, 1961 and the method of computation provided therein is adopted by the Central Government to exempt ‘agricultural income’ from tax and the State Government levies tax on the same ‘agricultural income’ calculated by the same method. The disparity is legally jusitifiable and in our quasi-federal setup the items on the three lists in the Seventh Schedule provide the mandate to the respective governments. Is it then that in the compromise between the Centre and the State the ultimate casualty has to be the poor Indian farmer. Can the State Governments be directed to consider the benefit of poor farmers as the ‘basic feature’ rights of the Indian socialist democracy?