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Centre can't, but states can tax farm income: CEA
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SME Times News Bureau | 29 Apr, 2017
Restoking the debate on the
politically sensitive issue of taxing agriculture income, Chief Economic
Adviser (CEA) Arvind Subramanian on Friday said that states have no
constitutional restriction on taxing farm incomes.
"The legal
situation is nothing prevents state governments from taxing agriculture
income. The constitutional restriction is on central government taxing
agriculture income," Subramanian told reporters here on the sidelines of
the annual session of the Confederation of Indian Industry (CII).
"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. The CEA also stressed the need to make a clear distinction between the rich and poor farmers.
Earlier this week, Finance Minister Arun Jaitley said the government has no plans to impose any tax on agricultural income.
"I
categorically state that the central government has no plan to impose
any tax on agriculture income," Jaitley said in a tweet, clarifying that
the Centre has no constitutional authority to tax agricultural income.
Talking
to reporters here on Tuesday, NITI Aayog member Bibek Debroy had said
that taxes should be imposed on agricultural income above a certain
threshold in order to expand the tax base.
"The eventual answer
to expanding the tax base is to tax the rural sector, including
agricultural income above a certain threshold," Debroy had said.
"While only the agricultural income of farmers is exempt from taxation, their non-agricultural income also goes un-taxed."
"I
don't believe in the artificial rural-urban distinctions. So, whatever
is the threshold of personal income tax in urban areas should be for the
rural areas as well," Debroy added.
The NITI Aayog, in a
statement on Wednesday, said Debroy's suggestion is neither the view of
the Aayog "nor is such a recommendation made anywhere in the Draft
Action Agenda document as circulated to the Governing Council at the
meeting on 23rd April 2017".
"NITI Aayog notes that the views on
taxing farm income expressed by Member Bibek Debroy were personal and
not those of the Aayog," it added.
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