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India
26 Apr 2017

NITI Aayog says farmers should pay income taxes

NITI Aayog's taxation theory needs a reality check?

NITI Aayog member Bibek Debroy proposed, at a news conference on Tuesday, that Indian farmers should start paying income tax.

Debroy opined that income-fluctuation will also be taken into account while determining the tax threshold for farmers.

The suggestion comes at a time when TN farmers are protesting to seek drought relief after failing to sustain their lands.

Here's what it had to say.

In context

NITI Aayog's taxation theory needs a reality check?
The reason that lead to such a radical measure

Measure

The reason that lead to such a radical measure

Debroy said that I-T will be levied above a threshold set by government and income would be gauged over a period, rather than a year.

This has been suggested keeping in mind the fact that majority of Indians live in rural areas and since only half of urban households come in the I-T bracket so, rural areas should now be explored for taxation.

Income

It's not a very feasible initiative

This initiative aims to tackle cases where, people have shown non-farm income as farm income to evade taxes, hurting government coffers.

The intentions behind the move might be noble but sounds crass on the backdrop of increasing farmer suicides and the fact that despite being an agrarian economy, conditions of Indian farmers have not seen a significant leap over the years.

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Paying taxes may need to take a back seat

Taxes

Paying taxes may need to take a back seat

Between 2012 and 2015 over 10,000 farmers have committed suicide and the causes are mainly, crop failure due to lack of rain, not getting the deserved price and impossible debts.

According to World Bank, only 35% of India's agricultural land is properly irrigated.

Levying taxes under these conditions may not be fruitful as very few farmers would actually cross the set I-T bracket.

Farmers

Government needs to take a look at the other side

Although the government has created APMC Acts to eliminate the middlemen from the process of farmers selling crops to the market, but it's not enough.

Usually, local moneylenders are blamed when a farmer commits suicide unable to pay debts, however, government records show that in 2015, 80% farmers committed suicide because they couldn't pay back loans taken from banks or registered microfinance institutions.

The current plight of farmers in Tamil Nadu

Tamil Nadu

The current plight of farmers in Tamil Nadu

Tamil Nadu farmers had been protesting for the last 41 days demanding Rs. 40,000 crore relief packages following the drought, farm loan waiver and setting up of the Cauvery Management Board by the Centre.

Farmers have decided to cease protest till May 25, after meeting the CM Edappadi Palaniswami, who has promised them to take their demands personally to the Prime Minister.

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