Money Laundering related to agricultural land reforms

Do you know which is India's biggest laundry converting humungous amounts of black money into white? It is Agricultural Income!! which in India remains tax free. I have always been a proponent of taxing agricultural land holders by putting a reasonable ceiling on land holding to exclude the poor farmers from the tax burden - say landholders owning less than ten to fifteen acres of land. When India was ruled by Kings, what was the revenue for the kingdom? - nothing but land revenue paid in cash or kind (produce from the land based on land holding. Unfortunately, in modern India, this source of revenue for the Government is a strict no - no. Why? because most politicians are land owners and "farmers" at least on paper! and they can convert ill gotten gains into tax free income by showing it as agricultural income. Nowadays this is not restricted to politicians only! You will find a whole host of industrialists who suddenly become farmers once they realise that the tax on income is heavy!

Unfortunately in India, everything can be bought for a price - hence even though by law, you cannot own agricultural land unless you and your forefathers have been agriculturists, it is very easy to obtain the agriculturist certificate from the "Talati's" office and become a land owner. You will find that non-cultivable land bought cheaply suddenly starts producing farm produce for these new land owners. The next step is to siphon business profits by showing fictitious expenses, convert these into cash, and then deposit in your bank account as agricultural income! You can get farm produce sale cash receipts at any local mandi. Abracadabra - suddenly you have tax free income!!

The day we start taxing agricultural income or charging land revenue(beyond a threshold) for large holdings, we could see a decline in this laundry business. One also needs to stop the practice of alloting agriculturist certificates to non-eligible purchasers of agricultural land. For this we require political will, which hopefully, I may get to see in my lifetime.