To ensure better tax compliance, a parliamentary panel has urged the finance ministry to explore the possibility of introducing different ‘codes’ for those farmers who drive their income from only agricultural activities and those who generate incomes from both agricultural and non-agricultural sources.
“A separate code for farmers who have only agricultural income and therefore, have income below the exemption limit will not serve the purpose of creating a distinction that could help determine potential cases of tax avoidance and money laundering through agricultural activities,” a 116th report of the public accounts committee (PAC) titled ‘assessment relating to agricultural income’ has stated.
It observed that agriculturists are a heterogeneous category and include small and marginal farmers as also corporate houses. There are around 140 million farm families. About 80% of the farmers belong to small and marginal categories
The panel noted that taking into account the fact of increased financial inclusion due to opening of bank accounts under Pradhan Mantri Jan Dhan Yojana, the Government may encourage digital payments in the agriculture sector, enabling easy verification of the income earned from the sector.
The panel has urged the government to analyse the practices being followed in states such as Odisha where agricultural produce is sold to co-operative societies and payment for the same is deposited in the bank accounts of assessees.
The committee recommended formulation of SOPs to guide the officers who are involved in the process of examination of the veracity of agricultural income claimed for exemption.
The PAC also said the finance ministry could consider devising a mechanism for categorization of cases of agricultural income in three slabs – above Rs 10 lakh, Rs 50 lakh and Rs 1 crore in cargo account settlement system so as to better target high risk cases.
“A major chunk of agriculturists are reluctant to file income tax returns due to practical difficulties which relate to lack of awareness, frequency of going to I-T office and connectivity issues faced by them to travel to the income tax office etc,” the panel has observed.
It has stated that reluctance on the farmers to file income tax return has had the effect of resulting in non-availability of crucial information pertaining to agricultural production, land records etc. for the tax department database.