Able Taxation: Bridging Fiscal Inequity And Environmental Responsibility In Indian Agriculture

Abstract

In the context of fiscal sustainability and environmental stewardship, this paper presents a critical analysis of the case of taxation of agricultural income in India in the context of both equity and efficiency. Agricultural income has traditionally been tax-exempt because of its socio-economic weaknesses and food security needs, even though the economic character of the sector has undergone substantial transformation. The paper assesses the unfairness of exempting high-income farmers yet the other sectors are subjected to the burden of the tax and how the exemption causes distortion of both vertical and horizontal equity and tax evasion. Based on empirical evidence, policy reviews, and international comparative experiences, the paper considers the economic inefficiencies and environmental externalities, including resource misallocation, land misuse and unsustainable agricultural expansion which are facilitated under the existing tax system. It suggests a graded taxation system that will be applied to the wealthy farmers without harming the smallholders, thereby saving the lives of the rural folk and ensuring environmental equity. This discussion indicates that agricultural income taxation that has a proper structure, with digital land records, environmental compliance systems, and intergovernmental collaboration, can be part of a more equal, transparent, and environmentally sound tax regime. Recommended measures are high exemption thresholds, increased income verification and re-investment of tax proceeds on sustainable agriculture and rural development. This will be in line with the concept of environmental economics and climate-resilient development and will help in the development of a more inclusive and accountable tax structure in India.