CEA Arvind Subramanian repeats call to tax farm income

The government's chief economic adviser (CEA) Arvind Subramanian on Friday repeated his call for taxing agriculture, a politically-sensitive issue, saying that states have no constitutional restriction in taxing farm incomes.

"The legal situation is (that) nothing prevents state governments from taxing agriculture income. The constitutional restriction is on the 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, however, stressed on the need to make a clear distinction between rich and poor farmers.

The CEA's repeated call to tax farm incomes comes after finance minister Arun Jaitley asserted earlier this week that the government has no plan 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.

Niti Aayog member Bibek Debroy had, on Tuesday, supported Subramanian's views 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.

Niti Aayog, in a statement on Wednesday, said Debroy's suggestion was not the view of the Aayog. "NITI Aayog notes that the views on taxing farm income expressed by member Bibek Debroy were personal," it said.