New Farm Laws Bring Agricultural Income Under the Tax Net

Like a retro Bollywood movie with multiple double acts and plot twists, the controversy surrounding the three farm laws is not just limited to the specific legislations per se, but there is more to it, much more sinister. When the Income Tax Act, 1995 (ITA) and Central Goods and Services Tax Act, 2017 (CGST) are read in conjunction with the new farm laws, the sinister plot begins to unravel.

As per Section 2 (1A) in the ITA, agricultural income means any rent or revenue derived from land located in India, including rent on agricultural land and buildings, and is tax-exempt. The Supreme Court’s decision in the Commissioner of Income Tax vs Raja Benoy Roy (1957) case also defines agricultural income.

To qualify, it is essential to have two types of operations on the land, basic and subsequent. Basic operations include our classic understanding of agriculture of cultivation, tilling, sowing, planting, etc., and demands labour and skill to make the crop sprout.

Subsequent operations include the more demanding acts of weeding, digging, removal, tending, pruning, cutting, prevention from insects, pests, cattle, disease, etc., after the crop sprouts.

Under contract farming, a farmer could undertake many of these operations and qualify for income tax

— source | Jaimal Shergill | 30/Jan/2021


Nullius in verba

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s