Officials said there were instances where land sold to developers was used to show capital gains as agricultural income. In some cases, officials used satellite maps to detect misuse of tax provision

New Delhi: The Central Board of Direct Taxes (CBDT) has come across several cases where individuals have claimed income tax exemption on agricultural income without land ownership. Over 300 cases have been identified by the authorities – through data analysis alone – where the claimed exempt income was between Rs 50 lakh and Rs 400 crore, but the declared size of land holding was zero. According to CBDT officials, in these 310 cases, the amount of exemption claimed – meaning tax foregone by the government – ​​is Rs 2,038 crore. The investigation revealed that various devices were used to make “non-genuine” claims, including including capital gains as agricultural income. Officials said there were instances where land was sold to developers and capital gains on it were sought to be shown as agricultural income. In some cases, officials used satellite maps to detect misuse of the tax provision. There were also instances where undisclosed income was shown as agricultural income in tax returns – a move aimed not only at avoiding paying tax but also at money laundering. Similarly, tax authorities came across cases where related activities were shown as agriculture to avoid paying tax on income earned. Apart from cases where there was no documentary evidence to show agricultural activity, authorities have also come across cases where there was a massive mismatch in income, which was often disproportionate to the size of land holdings. The tax department, which is deploying tools to better analyze data as part of Saksham, conducted the investigation by collecting tax returns and matching some of them with high levels of farm income. Based on data from over 300 cases, it is urging taxpayers to update or amend their returns to accurately reflect their income and pay tax accordingly. The data was based on tax returns filed from assessment year 2021-22 (FY2020-21) to assessment year 2023-24 (FY2022-23). Going forward, there are calls for using more tools to prevent such misuse of tax provisions. For example, satellite images are being used to keep track of the type of produce coming out of farms for which exemption is being claimed on the basis of agricultural income. While there is no move to tamper with the rebates available or go after smaller producers, the idea is to ensure that the big fish, claiming bigger rebates, do not get away with making false claims.