In this article we will discuss about the proposals of Raj committee for additional taxation on agriculture.

Imposition of agricultural taxation has always been a source of controversy between the centre and the states. The central government appointed the committee on taxation on agricultural wealth and income under the chairmanship of Dr. K.N. Raj in February 1972 to examine the question of taxation of agricultural wealth and income from all aspects. The Raj committee submitted its report in October 1972.

The major recommendations of the Raj Committee were:

(i) Imposition of Agricultural Holdings Tax (AHT) on agriculturists.


(ii) In the case of assessees paying non-agricultural tax, income from agriculture should be included in the total income for the purpose of calculating income tax.

(iii) Income from livestock, poultry, dairy farming etc., should be subject to tax.

(iv) An integrated taxation of agricultural property through wealth tax should be introduced.

(v) Capital gains tax on transfer of land should be imposed. According to Raj Committee, there were two basic defects in the present land revenue system.


These were:

(a) The relationship between the incidence of the land revenue and the productivity of land was not uniform ‘in the country,

(b) land revenue which was assessed at the flat rate was not progressive. In order to remove these two basic defects, Raj Committee recommended the Agricultural Holdings tax. The Committee further recommended that if the average output of a crop in a district was less than half the average output of the 10 earlier years/the agricultural holdings tax should be cancelled.

The AHT should be levied on the operational holding viz., land owned by the farmer minus any part of land leased out or mortgaged to others plus land leased in or mortgaged to him by others. To ensure the success of AHT, the committee recommended the system of crop inspection and recording of crop averages.


The salient features of AHT as suggested by Raj Committee were as follows:

(i) The assessment of AHT would be done on a certain criterion which would be uniform throughout the country.

(ii) The AHT would take into account the difference in productivity of land over the country.

(iii) The tax was to be progressive as it fell heavily on the holdings with larger ratable value.

(iv) AHT was to be assessed on operational holdings.

(v) AHT was to be levied on the family (as a basic unit of assessment) and not on the individuals.

(vi) The year of assessment was to be the same throughout the country.

The suggestion about agricultural holding tax was criticised by many economists. In the first instance, it was pointed out that it would be very difficult to divide the whole country into homogeneous regions so far as their productivity was concerned. Preparation of records for the estimation of the value of various relevant variables was another difficulty.

Secondly, it was felt that its administration would be too costly. Thirdly, as C.H. Hanumantha Rao pointed out, calculation of tax on the basis of output of previous ten years might benefit the large farmers who had been constantly benefiting from the adoption of new technological innovations.


The imposition of agricultural holding tax was criticised on another ground also. It was pointed out that as this tax was based on the size of the operational holdings, it would exclude the rental income from agricultural taxation.

Dr. Raj had accepted this criticism. He suggested that:

(a) The tax liability of an operational holdings might be shared between owners and tenants and

(b) The Indian Income Tax Act might be amended so that rental income derived from agriculture was treated in future as non-agricultural income.


This tax, so far, has not been imposed in the country.

One of the major recommendations of the Raj Committee was the recommendation of aggregation of both agricultural and non-agricultural incomes for the purpose of Income tax.

This was based on the principle that the tax burden of assessees with similar incomes should not differ sharply merely because of the fact that part of it is derived from agriculture. Integration would also help to check evasion of taxable income of non-agricultural sector.

The Raj Committee had also recommended that, as stated earlier, the Agricultural Holdings Tax should be supplemented with a tax on agricultural property and a tax on capital gain which would arise due to the sale of such a property.