The Economic Survey for 2024-25 revealed that the annual growth rate of agricultural income has been 5.23% over the past ten years. Agriculture and its associated activities have always been a crucial pillar of India’s economy, playing a substantial role in both national income and employment generation. However, ahead of the Budget for 2025, there has been widespread dissatisfaction among taxpayers and netizens about the unequal treatment in taxation between farmers and salaried individuals.
The survey showed that the “Agriculture and Allied Activities” sector has consistently been the foundation of the Indian economy, making significant contributions to both national income and employment opportunities. Taxpayers and experts have raised concerns that despite employing nearly 50% of the population, the agricultural sector only contributes 17% to the GDP, highlighting the significant disparity between small-scale farmers with limited earnings and a privileged minority with substantial wealth.
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In India, just 6% of the population submit income tax returns, of which less than 3% fulfill their income tax obligations. The salaried class shoulders a significant portion of the tax burden, contributing approximately half of the total personal income tax revenue. On the other hand, wealth farmers and landholders are exempted from paying any taxes.
Currently, agricultural income is exempt from taxation and is excluded from the calculation of total income as stated in Section 10 (1) of the Income Tax Act of India. The Central Government is prohibited from levying or collecting taxes on agricultural income because of this exemption clause.
Taking to the social media platform, a X user wrote: “Introduce *Income Tax on Agricultural Income on large landlords (Say 10 Acres plus), this way, you can add 26% of Agriculturists as tax payers (Politicians are also enjoying this exemption).”
“Middle class 60% tax on saving account deposit of 10 lakh rupees.
Agricultural income 1cr no tax
Politician income 50 lakh no tax
Political party income 7000cr no tax
Sarkari babu income 500cr No tax
(Don’t required source of income)
But middle class required sources of income or tax loot government loot middle class 60% money. No vision. Only middle class tax burden. Middle class only get tax ,new tax,surcharge etc,” said another X user.
“Farmers earning more than 50lakh a year should be paying taxes? What do you say .
@nsitharamanoffc
@nsitharaman
Can we start 5% tax on 50lakh income from agriculture? Till 50 lac agricultural income can be exempted.”
How is agricultural income taxed?
“Under the Income-tax laws, the agricultural income is exempt from tax in India. However, the term ‘agricultural income’ is not defined specifically under the tax law,” said Sneha Padhiar, Partner, Bhuta Shah & Co.
The term ‘agricultural income’ can be explained:
A. Income from cultivation of crops: This includes production of foodgrains, vegetables and other crops.
B. Income from sale of livestock / poultry: If the agricultural activity involves breeding or rearing animals (e.g. cows, goats, etc.), income arising from sale of livestock is considered agricultural income
C. Income from sale of trees / plants: Sale of trees / plants standing on agricultural land is covered within the ambit of ‘agricultural income’.
D. Income from sale of natural products: The income arising from sale of products like honey, milk or natural products are to be considered as agricultural income.
“Under the tax laws, the term ‘agricultural income’ is meant to include income derived from land used for agricultural purposes. However, the exemption is not only confined to income arising from usage of agricultural land (or soil). Various judicial precedents have established that income of nursery derived from saplings or seedlings where cultivation was made on pots (and not on ground) is to be considered as agricultural income. The cultivation activity has to be done on soil and not on ground to ponder the produce as ‘agricultural income’. The portion of an agricultural land which is fit for cultivation / farming, and actually used for agricultural purposes is the soil. Therefore, if there is optimum utilization of soil for the purpose of producing natural products like vegetables, fruits, etc., then exemption can be claimed and sustained,” said Padhiar.
She added in certain classes of agricultural products, the Income-tax rules have prescribed certain proportion of income, which could be treated as ‘agricultural income’. The balance of income would qualify as ‘business income’. These products would include tea, coffee, rubber, etc.