To tackle possible tax evasion and money laundering concerns and improve tax compliance, a parliamentary committee has suggested that different tax codes for farmers be looked into according to their sources of income. The plan seeks to distinguish between farmers who make their living exclusively from agricultural pursuits and those who earn a living from both agricultural and non-agricultural activities.
Addressing Heterogeneity in Agricultural Sector
The 116th report of the Public Accounts Committee (PAC) titled 'Assessment Relating to Agricultural Income' underscores the necessity of delineating between various types of agriculturists. This differentiation becomes crucial given the heterogeneous nature of the agricultural community, ranging from small and marginal farmers to corporate entities.
With approximately 140 million farm families in India, of which 80% belong to the small and marginal categories, the panel acknowledges the significant role of agriculture in the country's economy.
Encouraging Financial Inclusion and Digital Payments
Acknowledging the significance of financial inclusion initiatives like the Pradhan Mantri Jan Dhan Yojana, the panel advocated for promoting digital payment systems within the agriculture sector. Furthermore, it recommended the adoption of Standard Operating Procedures (SOPs) to streamline the assessment process of agricultural income claims, facilitating efficient verification and compliance procedures.
Proposed Mechanisms for Enhanced Taxation
To better target high-risk cases, the committee proposed the categorization of agricultural income into three slabs – above Rs 10 lakh, Rs 50 lakh, and Rs 1 crore. This system, integrated into the cargo account settlement framework, aims to provide a structured approach to identify and address potential tax evasion instances within the agricultural domain.
The panel's recommendations also address the reluctance among farmers to file income tax returns, attributing it to various practical challenges such as lack of awareness, accessibility issues, and connectivity constraints. Overcoming these barriers is crucial not only for improving tax compliance but also for enriching the tax department's database with essential agricultural production and land records data.
The proposed measures outlined by the parliamentary panel signify a concerted effort towards fostering transparency, fairness, and efficiency in taxation policies concerning the agricultural sector, thereby contributing to the broader goal of ensuring fiscal integrity and accountability.
