'Zero tax on Rs 40 cr agriculture revenue, salaried person pays...': Expert highlights inequality in taxation 

Income generated from agricultural activities and farmland is not subject to taxation as per Section 10(1) of the Income-Tax Act 1961. The government introduced this measure to provide relief to small and marginal farmers facing financial difficulties. Despite the intentions behind this provision, it has inadvertently enabled wealthier farmers to evade taxes, despite benefiting extensively from public infrastructure, subsidies, and services in comparison to small-scale farmers.

The discrepancy in the tax system has been a topic of conversation for quite some time. A post by A K Mandhan, a Research Analyst registered with SEBI, shed light on significant disparities in taxation. The statistics shared in his tweet have caused concern, especially among salaried workers who face a notably higher tax burden compared to other industries.

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According to Mandhan, an individual with a salary of Rs 9 crore pays Rs 4 crore in income tax, whereas a business generating Rs 20 crore in revenue only pays Rs 80 lakh. In contrast, agricultural income of Rs 40 crore is exempt from tax, and even political parties with revenues reaching Rs 7,000 crore pay no income tax. Surprisingly, the Indian Premier League (IPL), a major sports enterprise with Rs 12,000 crore in revenues, reportedly does not pay any income tax.

"Salary                           9 CR
Income Tax                  4 CR
Business Revenue     20 crore
Income Tax                   80L~
Agriculture Revenue      40 CR
Income Tax                       00.00
Political party revenue    7,000 crore
Income Tax                        00.00
IPL revenue                        12,000 crore
Income Tax                        00.00And they ask when is 
#India’s brain drain going to stop," Mandhan wrote on X.

Ground-level facts

Based on data from the ICE 360° survey conducted by People Research on India's Consumer Economy (PRICE), there are approximately 5 million 'wealthy farmers' in India who earn over Rs 25 lakh annually. Two-thirds of their income is derived from agriculture, while the remaining third comes from non-farm activities. Despite making up only 8% of the farming population, these wealthy farmers control 28% of the sector's income.

It is interesting to note that around 45% of these prosperous farmers also receive benefits from the PM-Kisan Samman Nidhi scheme. These farmers are primarily concentrated in developed rural areas of Andhra Pradesh, Punjab, Kerala, Haryana, Tamil Nadu, and Karnataka. They typically have larger landholdings, access to modern technology, and are more involved in commercial agriculture.

The divide is further highlighted by the fact that 67% of wealthy farmers own 2-wheelers, 29% own cars, and only 28% own tractors, indicating their investments beyond just basic farming equipment.

Burden on taxpayers

In India, merely 6% of the populace file income tax returns, with less than 3% actually meeting their tax obligations. The burden of taxation falls heavily on the salaried class, who contribute around half of the total personal income tax revenue. This disparity has led to concerns about a potential brain drain, as highly skilled professionals in sectors like technology and finance are increasingly choosing to relocate abroad in search of fairer taxation, better income opportunities, and an improved quality of life.

The imbalance in tax obligations, with salaried individuals bearing the brunt while political parties and large corporations enjoy exemptions, has exacerbated economic inequality.