IT Department Uses Satellite Image to Nix Dubious Agricultural Income Claims

In a significant tax investigation, the Income Tax Department discovered discrepancies in agricultural income statements using satellite images. A farmer claiming Rs.7 lakh per acre in farm income and Rs.1 lakh per acre in rental earnings for land around Hyderabad has come under scrutiny due to discrepancies between the figures and real cultivation data.

Agricultural income is exempt from income tax, giving it an appealing avenue for converting unreported wealth into legal income. However, authorities are now pursuing those who record exceptionally high agricultural income in order to avoid taxes.

In recent days, the Income Tax investigation unit in Hyderabad has issued notice to nearly 50 persons declaring agricultural income over Rs.50 lakh per annum or Rs.5 lakh per acre, indicating probable tax fraud.

The Hyderabad unit’s investigation is part of a national campaign to combat fraudulent farm income declarations. In Telangana and Andhra Pradesh, the emphasis is on landowners in Hyderabad and Visakhapatnam, where growing urbanization has raised land values and promoted tax evasion.

Key Findings from 150 Flagged Cases

Investigators discovered various instances in the 150 cases flagged for scrutiny:

• Undeclared land-use changes include farmland that was never cultivated.
• Real estate exploitation occurs when agricultural land is transformed into plots and real estate projects while still being declared as farm income.
• Capital gains tax evasion occurs when taxpayers improperly claim tax exemptions on land sales that should be categorised as business income.

Who Will Face Penalties?

Officials highlight that only legitimate agricultural activities are eligible for tax exemptions. Under the tax laws:

• The income from farming and leasing rural farmland is tax-free.
• Selling urban agricultural land or repurposing farmland is taxable.

Conclusion

With notices issued and investigations intensifying, landowners who refuse to submit documentation of farming operations may face penalties, tax reassessments, and legal implications. The Income Tax Department remains committed to eliminating loopholes that allow black money to be disguised as farm income.