ABSTRACT
Agriculture is an important occupation in India, with the nation depending highly on it for food. The central and state governments promote agricultural development through income tax exemptions and defined provision. Agricultural income is exempted from tax as per Income tax Act, 1961. Section 10(1) exempt agricultural income from taxes. These exemptions stem from the constitutional divisions of powers among the government, where agriculture falls under the purview of the states.
The exemptions serve as a social and economic policy tool, assisting the livelihood of millions of farmers in a predominantly agrarian financial system. It recognizes the volatility and risk natural in agriculture, like dependency on monsoon season and fluctuating market price. Moreover, the tax exemptions have faced criticism for being the potential loopholes, exploited by non-agricultural companies to evade taxes by misclassifying income.
This research paper tried to explore into the legal provisions administering agricultural income, the criteria for income classifications, and the potential for reforms. It also identifies the broader implication of these exemptions on fiscal policies, income inequalities, and tax administration. It also explores the balance among supporting the agricultural industry and guaranteeing that tax laws are not misused, highlighting the requirement for the nuanced approaches to agricultural income taxation in India.
The decisions to execute agricultural taxations in India will need careful deliberation and the nuanced approaches that balance the requirement for revenues with the welfare of the farmers and the broader taxes base expansion objective. It remains an important issue that demand thoughtful policy considerations.
Keywords: Agriculture Income, Tax Exemption, Income Tax Act, 1961