Government's top policy makers appear to be at odds over this contentious issue.
Joining the debate on taxing agriculture income, Chief Economic Adviser Arvind Subramanian today said states, which have the option to levy the tax, should make a distinction between rich and poor farmers.
"The legal situation is...nothing prevents state governments from taxing agriculture income. The constitutional restriction is on central government taxing agriculture income. "There too, one could make a case that this is a choice open to 29 state governments and if there are willing takers, all power to them," he said. Subramanian also stressed that there is a need to make a clear distinction between poor and rich farmer.
"Why is it that it is very difficult to make a distinction between a poor farmer and a rich farmer... When you say farmer, people think that you are going after the poor farmer. "So what is it about political discourse that does not allow these distinctions to be made. Why can't we say, rich regardless of where they get their income, should be taxed," he said.
A controversy erupted after NITI Aayog member Bibek Debroy suggested that the agricultural income should be taxed. However, Finance Minister Arun Jaitley later clarified that there was no such proposal and the Centre has no power to impose tax on agricultural income.
NITI Aayog Vice-Chairman Arvind Panagariya today categorically stated that there is no question of taxing agriculture income at a time when the government is keen on doubling the income of farmers.
"80 per cent of rural areas are connected to agriculture and we are talking about doubling farmers' income. How can we talk about taxing farmers income?" Panagariya told reporters on the sidelines of a CII function.
He was responding to a question on controversial remark on taxing farm income made by NITI Aayog member Bibek Debroy.
"There is nothing of taxing agriculture income... in the document," Panagariya said, adding that the nearest thing that was mentioned in the 3-year action agenda was loopholes should be plugged to prevent non-agriculturists from converting their black money into white by showing it as agriculture income.
On farm loan waiver, the NITI Aayog vice-chairman said, "States are empowered to waive farm loan... Besides their priorities, states are bound by the FRBM Act." A controversy had erupted after Debroy at a press conference said the agricultural income should be taxed.
However, Finance Minister Arun Jaitley later clarified that there was no such proposal and the Centre has no power to impose tax on agricultural income.
The NITI Aayog too quickly distanced itself from the comment, saying it was the personal view of Debroy and there was no proposal in the 3-year action agenda, which was circulated among the chief ministers on Sunday, to tax farm income.
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 "Arvind Subramanian")
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