Agricultural Income Flashcards
(26 cards)
Constitution and Statute sections that deal with agricultural income
AI is not taxed as income under Entry 82 of List 1 expressly excluding Agricultural income. According to Section 10 therefore agricultural income is not to be included in the computation of total income.
Agricultural income taxation is by?
States under Entry 46 List II.
farming community pay gst?
They pay GST, land revenue and local rates. Unprocessed produce is exempted under GST law, only processed produce is taxed. The moment one applies manual or mechanical processes, it is not agricultural produce.
Application of land revenue to agriculture
Yes, agriculture is subject to the oldest form of tax called land revenue. It is the only source of revenue from agriculture for the government. The district collector office was created for land revenue collection. Now they also do administration of justice. land revenue is tough to collect because of immutated records.
Application of income tax to agriculture
No, parliament does not have power to impose income tax on agriculture. Exempted under Section 10.
Application of capital gains tax to agriculture
No, sale of land used for cultivation or agriculture is exmepted.
Application of property tax to agriculture
No, property tax cannot be levied on agricultural land.
Application of wealth tax to agriculture
Although agricultural land can be included in wealth tax, the Wealth Tax Act is repealed, and therefore it does not apply to agricultural land.
Estate Duty
Estate duty is a tax levied on the total value of the assets left behind by a deceased person. In India, estate duty was abolished in 1985. As a result, there is no estate duty on agricultural land or any other assets.
Succession tax on land?
No, abolished in india
Indirect taxes on land?
No, exempted from GST as it is unprocessed produce.
Why is there no valid justification for not imposing taxes on agri income?
As industrialisation grew, land revenue became an insignificant source of revenue. Today, although agri is a significant contributor to GDP, it pays little taxes since it involves no exchange of money. Previous attempts at reforming land revenue has resulted only in nominal changes. Agri income remains significantly undertaxed.
Why to tax agriculture?
The opinion of some experts (SK) is that the primary objective of taxing agricultural income should be to regulate the sector and bring it under the formal sector, rather than revenue generation.
Committee on modus operandi of taxation
KN Raj Committee on Taxation of Agricultural Income and wealth (KNRC on TAIW~an~)
What were the two recommendations of the KN Raj Committee on Taxation of Agricultural Income and Wealth?
Implementation of Agriculture Holding Tax by the states (not implemented)
Partial integration of Agricultural income by the Central Government (section 2 of the finance act has applied this recommendation from 1973 till date)
What is Agricultural Holding Tax
Tax based on an index that reflects the productivity of land on an average, making allowance for differences in soil and climate
Who should govern aht? how is it calculated?
State government to make land revenue more rational and uniform. Restructure the stratification based on soil, climate and differ on basis of districts. Yield norms should be determined by crop patterns
How is AHT Calculated
First, you take the taxeable base, which is the operational holding. This is done by taking the land owned plus any land leased or taken on mortgage for cultivation minus land leased out or mortgaged out.
Then, the rateable value, which is the gross receipts/revenue minus any cost paid out and depreciation on instruments and machines
Then you get the taxable rateable value which is the RV minus the cost of development of the land which is suggested to be 10% of the RV for better irrigation and soil improvement.
TRV/(2*1000) is the Tax Rate.
Why was AHT not implemented?
States hesitant to scrap land revenue.
Feasibility of AHT
Administrative point: Expensive, requires increase in manpower, records of ten years unavailable, records of depreciation and expenses always exceed gross receipt
Since AHT would be using the pre-exisitng land revenue machinery, would have thought that the compliance cost would be low, but due to illiteracy it was tough in a pilot proejct.
SK on AHT
SK — believes AHT should be uniform in policy, with the Centre as the nodal agency. This would make administration easier, with the state government responsible for ensuring implementation in a reliable and uniform manner.
Partial Integration in simpler terms
Imagine your agricultural income acts like a lever. Even though it’s not directly taxed, adding it to your regular income can push a larger portion of your regular income into higher tax brackets. The calculation method then tries to isolate the extra tax you pay because you also have agricultural income above a certain limit. This is the “indirect taxation” of agricultural income. The government uses this mechanism to ensure that wealthier individuals with substantial agricultural earnings also contribute to the tax revenue.
How to calculate Partial Integration?
Amount 1 is the Tax liability of the aggregate of your AI and NAI.
Amount 2 is the exemption limit amount plus AI and compute the tax liability.
Amount 1 - Amount 2 gives the tax.
Constitutionality of Partial Integration Case
KJ Joseph v ITO (kerala)
