The Central Board of Direct Taxes (CBDT) has uncovered numerous instances where individuals claimed income tax exemption on agricultural income despite possessing no land holdings. Through data analysis, authorities identified over 300 cases where the exempt income claimed ranged from Rs 50 lakh to Rs 400 crore, yet the declared land holding size was zero. In these 310 cases, the total exemption claimed, representing tax foregone by the government, amounted to Rs 2,038 crore, according to CBDT officials.
Modus Operandi of Non-Genuine Claims
Investigations revealed that various tools were employed to make non-genuine claims, including disguising capital gains as farm income. Officials stated that in some instances, land was sold to developers, and the capital gains from such sales were sought to be shown as agricultural income. Authorities also used satellite maps to spot misuse of the tax provision. Additionally, undisclosed income was shown as agricultural income in tax returns, a move intended not only to avoid paying tax but also to legitimise black money.
Disproportionate Income and Lack of Evidence
Tax officials encountered cases where related activities were presented as agriculture to evade taxes on earned income. Besides cases lacking documentary evidence of agricultural activity, officials found massive mismatches between income and land holdings, often disproportionate to the size of land declared.
Probe Under SAKSHAM Initiative
The tax department, which has been deploying advanced data analysis tools as part of the SAKSHAM initiative, conducted the probe by examining tax returns with high levels of farm income and cross-matching them. Based on data from these 300-odd cases, the department is now nudging taxpayers to update or revise their returns to accurately reflect income and pay taxes accordingly. The data pertains to tax returns filed for assessment years 2021-22 (FY2020-21) through 2023-24 (FY2022-23).
Future Measures to Curb Misuse
Going forward, more tools will be employed to check such misuse of tax provisions. For instance, satellite images are being used to monitor the type of produce from farms for which exemption is claimed as agricultural income. While there is no intention to alter the exemption available or target small growers, the objective is to ensure that large claimants making false claims do not escape scrutiny.
