- RTI reveals large-scale evasion of tax and money-laundering may be taking place through agricultural income route.
- Between 2010-2011, area under cultivation, agricultural production remains almost constant, but agricultural income exceeds GDP by nearly 20 times
- Hardly 2% of the income tax assessees declare agricultural income, yet it runs into thousands of trillions of rupees
- Spike in agricultural income recorded during the same period when government-initiated enquiries regarding black money in foreign accounts
It is difficult to comprehend that agricultural income can be made a vehicle for large-scale evasion of tax and money laundering, not to the tune of thousands or millions or even billions, but in thousands of trillions of rupees. This fact emerged from a reply to an RTI application seeking information regarding declaration of agricultural income by income tax assesses. The said information made available by the Directorate of Income Tax (Systems) via a letter dated 27 May 2015 for the last ten financial years, 2003-04 to 2012-13.
The information was mind boggling. The number of assessees disclosing agricultural income has increased exponentially and the disclosed agricultural income has increased at a still higher rate.
Land Constant, Growth Constant, But Income Up By Trillions
The land under cultivation has remained constant over the years at around 14 crore hectares. The growth in agriculture has been hovering around 3-4 percent, never exceeding 5 percent. Agricultural production too has been almost constant around 14-15 percent of the gross domestic product (GDP) of the country. There has not been any agricultural revolution to justify exponential growth in agricultural income. Poor growth in agriculture is further buttressed by growing indebtedness among farmers with thousands of them committing suicide every year.
More than 90 percent of agricultural land is cultivated by marginal farmers who do not file any income tax return, as agriculture income is exempt from taxation. Hardly 2 percent of income tax assessees declare agricultural income.
But this miniscule percentage of so-called farmers have declared agricultural income worth thousands of trillions.
Agriculture income disclosed for financial years 2010-11 and 2011-12 exceed the total GDP of the country by nearly 20 times and 6 times respectively.
The average income of these so called farmers is around Rs 300 crore. In the next year it averages to around Rs 70 crore per farmer. How one wishes this was the state of our agriculture!
Black Money Laundered Through Agricultural Income
This gives rise to a bona fide suspicion that illegal gains (and clearly not agricultural income) from undisclosed sources are being laundered through the route of agricultural income and unscrupulous people are laundering their ill-gotten black money without paying taxes. If this income is subjected to tax, the taxes for the year 2010-11 would be around Rs 600 lakh crore , i.e. over 6 times the GDP of the country that year.
Yet another significant factor which needs to be flagged here. Around the same time, the government received information regarding black money of several Indians that was parked in foreign accounts and enquiries were initiated. After much delay, when the said bank accounts were finally reached, it was found that the money had mostly been withdrawn. It appears to be too much of a coincidence that there is tremendous spike in the declaration of agricultural income during the same period.
Issue Rocks Parliament, Govt Promises Probe
The information has been sent to the relevant authority for thorough investigation/enquiry in the matter. Further information relating to top hundred assessees of income tax who were disclosing such high income has been sought under the RTI Act. This was denied on the ground that the applicant has not brought on record any public interest warranting disclosure of information held by the department in fiduciary relationship.
In view of the denial an appeal was filed emphasizing that the attempt to evade taxes, and money-laundering using agricultural income was subterfuge, and hence clearly being in public interest.
When no reply to the earlier letters as also to the appeal was received, a public interest litigation was filed before the Hon’ble Patna High Court. This petition has requested for instruction to the concerned authorities for proper investigation, assessment and collection of taxes. The Hon’ble Court has called for a reply from the government.
Of late, this issue has rocked Parliament, and the government has promised to investigate into cases where more than Rs 1 crore agricultural income has been declared.
The whole issue however clearly points to systemic failure as agricultural incomes declared are being accepted without any questioning, however high the quantum.
(The author is a retired IRS official who filed the RTI application to the Income Tax Department. He has now moved the Patna High Court seeking further investigations into the matter, raising suspicion that income from undisclosed sources is being shown as agricultural income to evade taxes.)