watch_later 10/03/18

The Rajasthan government  announced a one-time loan waiver of up to Rs 50,000 for small and marginal farmers.

What will be its treatment in Income Tax . Whether there is need to show it in ITR , if yes then how to show it?

1 Response | Latest response: 10/03/18 | Sort by Likes(thumb_up) Recent | Income-Tax Reply
watch_later 10/03/18

Without referring to any judgement or established opinion, I will present my own opinion in this case.

Before coming to conclusion directly, lets have a look at this entire loan cycle.

  1. Farmer took loan for his business (in this case farming)
  2. He did not earn enough to repay loan amount
  3. Government waived off loans, meaning government will take this loss
  4. Farmers need not to pay loan amount

In this case we remove farmer and take a common man, then we can say that any non payment or written off should be considered as income and same is taxable, subject to him crossing taxable limit.

But, here the case is of farmers. Lets understand how agriculture income is taxed in India.

  1. Income tax act, exempts agriculture income from changeability.
  2. If agriculturist has any other income also, in that case tax is calculated including agriculture income and the tax on agriculture income is deducted. Indirectly tax payers pays a small amount on agriculture income also.

Now, coming to loan waiver part, should we not consider loan waiver gain as a gain from agriculture activity?

Loan was taken for purpose of agriculture, loss was from agriculture activities and inability to repay loan was due to loss in agriculture activity.

If farmers can deduct interest portion of loan they repay, as expense, why should not they account loan waiver as income from agriculture activities.

Further income tax act does not specify what is meaning of agriculture income and what does not amount to agriculture income.

Though Income Tax Act, do specify incomes which are to be considered as income from agriculture.

Loan taken is completely related to agriculture activities and should be looked as an extra ordinary items, how we account it in normal business sense.

In my opinion, Loan waiver is an exempt income in hands of farmer for reason it being related with agriculture activities.


Sign up to discuss taxation, accounting and finance topics with experts from all over India.

Join Discussion