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Money launderers turning to farmland

Money launderers turning to farmland
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First Published: Wed, Mar 28 2007. 01 10 AM IST
Updated: Wed, Mar 28 2007. 01 10 AM IST
Residents of large cities are increasingly looking to buy farmland in an effort to pass off their unaccounted income (black money) as agricultural income. Plots of land in interior Chhattisgarh, Jharkhand, and other parts of India can still be had for as little as Rs15,000-25,000 per acre, said Hemant Batra, a partner at Kaden Boriss Consulting Pvt. Ltd, a legal consulting firm. “One can buy a large tract of land, around 500 acres, for Rs 1.5 crore,” he added.
There are two agricultural seasons (kharif and rabi) in India, and most agricultural land returns two incomes, one for each season.
“This gives them (people buying land) an opportunity to pass off their unaccounted cash income as agricultural income,” said Batra. Agricultural income is tax-free in India.
India’s tax authorities said they were aware of the phenomenon. “Recently, a few cases have been brought to our notice and we are scrutinizing them,” said A.K. Sinha, a Central Board of Direct Taxes spokesperson. “There is a penalty of 300% (on the tax evaded) and this can also extend into prosecution in a court of law,” he added.
It’s easy for individuals to pass off unaccounted income as agricultural income, because Indian tax laws do not require farmers or others claiming agricultural income to maintain detailed records, the way self-employed professionals and salaried people need to. “Because agricultural income is exempt from tax, no documents are required at the time of filing tax returns,” said Sinha. “But the income tax department can ask for proof of ownership (of the land), and details of income generation if something looks suspicious.”
Many of these deals are facilitated by financial advisors, Batra said. He claimed that in Europe and the US, lawyers and accountants were being charged and prosecuted for aiding efforts at money laundering and tax evasion.
Several audit firms and advisories contacted by Mint refused to comment on the issue.
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First Published: Wed, Mar 28 2007. 01 10 AM IST
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