The Indian Government policy think-tank, NITI Aayog or National Institution for Transforming India, has decided to impose a tax on the agricultural income. NITI Aayog member Bibek Debroy proposed to bring the agricultural income under the tax net in the three-year action plan of NITI Aayog with a view to expand the tax base and prevent evasion. Apart from this, he also proposed to remove the exemptions on personal income tax.
The NITI Aayog has circulated the proposal to the state governments and will take the decision after receiving response from them.
According to Bibek Debroy, there should be no distinction between urban and rural and the threshold for the agricultural income should be same as existing one on the personal income. However, it will be decided by the states itself after taking into account the average income of either three years or five years as it is the subject of states according to the Seventh Schedule of the Constitution. The effort, he said, would widen the tax base and more funds could be made available for the social sector schemes.
The exemption on agricultural income was given with the aim of protecting the farmers. But it is being misused in evading the tax by non-farmers declaring agriculture as their source of income. Agricultural income earned by a taxpayer in India is exempted under Section 10(1) of the Income Tax Act, 1961. Agricultural income is defined under section 2(1A) of the Income-tax Act.
Presenting the Budget for fiscal year 2017-18 in the Lok Sabha, Union Finance Minister Arun Jaitley revealed new income tax slabs announcing reduction of 5 per cent in Income Tax rate for people with annual income between Rs 2.5 lakh and Rs 5 lakh and 10 per cent surcharge on people with annual income between Rs 50 lakh to 1 crore and 15 per cent surcharge on incomes above Rs 1 crore to continue.
Ravi Jain, Executive Director, Personal Tax, PwC, said, the change of tax rate for the slab Rs 2.5 to 5 lakh will generate tax savings for income group up to Rs 50 lakhs.
Love playing sports? Download this app "Win cash rewards while playing sports that you love".