Should agricultural income be taxed? Last week a Niti Aayog member argued that the government should tax farm income above a certain threshold. The view stirred up a hornet's nest among many. Oppositions took no time to condemn this attempt to "back-stab" the country's farmers. The government think-tank distanced itself from the comments made by the member and the Finance Minister rushed to clarify that the Centre had no plan to impose tax on farm income. But the debate refused to die down, with a top government official later in the week saying that states have no constitutional restriction in taking such steps.

Time and again, experts have raised concern that many tax evaders see tax exemption on agricultural income as a loophole. According to a media report, a RTI reveals that the agricultural income earned by the 6.57 lakh assessees who filed returns in 2011, at nearly Rs. 2,000 lakh crore, was over 20 times the country’s gross domestic product of over Rs. 84 lakh crore at the time. Equally dubious is the finding that farm income rose sharply during the same period when the Centre initiated black money probe in foreign accounts. According to another report, the average income of these so-called farmers was around Rs 300 crore and in the next year it averaged to around Rs 70 crore per farmer.

The above findings indicate that the blanket relief on agricultural income is being misused by many non-farmers, and this has prompted some to suggest taxing agricultural income above a certain level. In fact, the Economic Survey last year expressed a similar view when it said that better-off people should reasonably be taxed, no matter whether they got their income from agriculture. On the contrary, opponents of this view argue that it can be dangerous given that our farmers' income are highly volatile and prone to natural calamities, prices instability and other factors. The idea also sounds somewhat odd at a time when several parts of the country are in the grip of an agrarian crisis.