What are the merits and demerits of agriculture tax ?

Agricultural Tax can be levied both as Direct and Indirect Tax. As Direct tax, it is levied on agricultural property and capital gain. As Indirect Tax, levies on irrigation, drainage and equipment come under Agricultural Tax.

Positives/ Merits:

  1. Tax on agriculture increases the final prices of agricultural goods and services. High prices can be an incentive for people to enter the sector and help it grow.
  2. Increase in Government Revenue.
  3. Increase in Tax base
  4. Since land and resources are taxed, it results in better and efficient utilization of the resources.


  1. Since agricultural land are generally in rural areas and these areas work in an informal framework, so assessment of tax becomes a tedious process.
  2. Not suitable for small and subsistence farmers.
  3. Taxation system is complicate and is low educated farmers find it difficult to understand
  4. Reduction in cropping area

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