Policy Watch: The loophole for the well-connected
Has infra development changed India's cultural identity, asks Ketna Patel.
Hi there,
While there have been plenty of calls to reform India’s taxation system and social spending, some loopholes that have been allegedly useful to the richest have been overlooked, according to Kaviesh Kinger in this week’s Policy Watch (we’re raiding the archives for this one - Kaviesh wrote this just for Members last year). Scroll down for more.
We’ll be celebrating Holi on 20 March in London with a leading law firm and some of our Members. Watch this space for more information.
While leprosy has been curable since the 1980s, existing laws surrounding the disease remain stuck in the 1890s. Read more by Louise Timmins from The Leprosy Mission.
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Member news
Anand Mistry will be a speaker at the upcoming Playful Learning Conference on 3-5 July at the University of Sussex in Brighton. He is a co-founder of ProjectCHAKRA, whose work is rooted in his personal experiences having spent extensive time living and working with underserved and resource-poor communities in India. The team found this unconventional path brought with it significant personal growth as well as a breadth of networks and opportunities which weren’t generally available in other sectors. Find out more about the event here.
London-based pop artist Ketna Patel just finished travelling around India over the last five weeks. In this video she reflects over the immense infrastructure development and progress she’s seen, but also wonders if rapid changes in the built environment are changing communities’ cultural identity.
Bridge India’s first ever team member in 2019, Ujani Ghosh, will be starring in the lead role in theatre play Silvatein - The Wrinkle in Time in Bangalore on Sat 9 March. To find out more click here.
Check out Ali-Asghar Abedi’s satirical look at the week’s economics and business news at his Substack Funny Business. He is a comedy writer based in New York. His work can be seen on PBS’s G-Zero World with Ian Bremmer and onstage at the Upright Citizens' Brigade Theatre. He famously pranked US right-wing personality Tomi Lahren into called Donald Trump an “ullu” (“dumbass”).
Policy Watch: Is it time to reform the agricultural income exemption?
In 2023, Oxfam reported that the richest 1% in India own more than 40% of the country’s total wealth, while the bottom 50% share just 3% of India’s wealth. In the same year, India’s income tax department denied a proposal to increase capital gains tax for top earners.
While there have been calls to reform India’s taxation system and social spending, the loopholes that have been allegedly useful to the richest have been overlooked.
One such loophole is the agricultural income exemption, recently coming under media attention because of its suggested benefit to celebrities.
As per the Income Tax Act of 1961, agricultural income earned by a taxpayer in India is exempt without any limit under Section 10(1). As analysed in a study, the agriculture sector is conventionally seen as mostly small farmers working to sustain themselves.
However, in recent years studies have noted the increased presence of corporates/ companies that report agricultural income. This has led academic Prarthana Govappa to describe the agriculture exemption clause as a ‘Loophole for the Well-Connected’ in an academic study. Indeed, in a Comptroller Auditor General (CAG) report in 2019, 57% of the claims of agricultural income exemption were by companies. Considering the inequalities enshrined in the agricultural sector, with small and marginal farmers operating with less than 10% of the total agricultural land, it has led some to suggest that the rich benefit more from this exemption. After all, multinational companies are able to claim large exemptions from agricultural income.
Recent reports in the media of Shahrukh Khan’s daughter Suhana’s purchase of three houses worth Rs 12.91 crore claiming to be an agriculturist illustrates Govappa’s characterisation of this loophole. These properties were registered under Deja-Vu Farm Pvt Ltd, the directors of which are her maternal grandmother and aunt. On this purchase, she allegedly only incurred a stamp duty of Rs 77.46 lakh for land that spread over 1.5 acres.
There have been plentiful reports on the problematic exploitation of this exemption clause, such as alleging it to be a money-laundering front. What is clear is that this exemption clause delivers benefits to the wealthy, with 2,746 agricultural income exemption cases being worth more than Rs 1 crore, per Income Tax department reports. The 2019 CAG report also found that 22.5% of the exemption claims were allowed without any examination or verification of supporting documents.
Celebrities have also been rumoured to be using other methods to avoid paying tax, such as Alia Bhatt registering a Rs 37.8 crore property under her production house and cricketer KL Rahul’s lavish wedding gifts. Agricultural income may be another convenient front for celebrities, one that could benefit from the attention of reformist voices in Indian society.
By Kaviesh Kinger. You can reach him at kaviesh@bridgeindia.org.uk.
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