Taxing farm income is 'politically challenging', says top economist

Bibek Debroy ruffled feathers when he said agricultural income above a certain limit should be taxed

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Terming taxation of farm income as "politically challenging", eminent US-based economist Pravin Krishna has sought to draw a line between rich and poor farmers, and corporate and non-corporate agriculture incomes.

He also underscored the need to prevent non-agricultural income from being passed off as agricultural one.

"With so many poor farmers, the taxation of agricultural income is obviously extremely challenging to achieve politically unless there was a broad-based consensus to do so, which is unlikely to be achieved any time soon," Krishna, a Chung Ju Yung Distinguished Professor, Johns Hopkins University, told PTI in an interview.

"Any future discussion on agricultural income will clearly have to distinguish between rich and poor farmers and between corporate and non-corporate agricultural incomes," he stressed.

Recently, NITI Aayog member Bibek Debroy kicked up a storm when he said agricultural income above a certain threshold should be taxed.

Finance Minister Arun Jaitley was quick to clarify that there is no such proposal and the Centre has no power to impose such a tax.

About demonetisation, Krishna noted that there is an impressive growth in digital payments and the bank deposits have probably brought a number of additional individuals and households under the tax scanner.

"However, unless a more sustained campaign is waged against black money and the informal economy, these benefits will likely prove to be short-lived," said Krishna, also Deputy Director, Raj Center on Indian Economic Policies, Columbia University.

Asked what should be the government's agenda for the next two years, he said, "The focus should continue to remain on improving production efficiency through regulatory reforms, infrastructure improvements and greater use of our digital infrastructure to achieve greater formalisation and improvement in governance, among other things.