HYDERABAD: Politicians may not see eye to eye on key issues, but they are certainly on the same page when it comes to creating avenues to pay less tax on their towering incomes. An analysis of the election affidavits shows that candidates have declared a major portion of their income as agricultural income as it is not taxable under the Income Tax Act of 1961 or indicated that they belong to Hindu undivided families (HUF).
For instance, Chief Minister K Chandrasekhar Rao who recorded a staggering Rs 2.17 crore total income in his election affidavit has divided it among members of his undivided family. Further, a major portion of the money in the HUF unit was declared agricultural income.
His affidavit showed Rs 1.10 crore under his name and Rs 96 lakh as belonging to his family unit, of which Rs 91 lakh was declared agricultural income.
“If the entire amount was declared as belonging to a single account, then more tax would have to be paid as per the income tax slab rates. Though slab rates for HUF and individuals are not very different, dividing the sum among people reduces taxable income,” P Sudarsana, a chartered accountant, explained.
Rao’s agricultural income comes from at least 11 agricultural lands he owns at Erravelli village of Markuk mandal in Siddipet district. The lands bought over a period of eight years totally cover over 54 acres and is worth north of Rs 13 crore.
“Agricultural income is not taxable under the law. Though the total income will be taken into consideration during computation, agricultural income is excluded from the taxable part,” Sudarsana said. He added that only those who own agricultural land can declare agricultural income.
Similarly, TPCC working president and Kodangal candidate A Revanth Reddy whose income has risen by Rs 10 lakh from 2014 has declared himself as belonging to a Hindu united family. Reddy, who has termed his occupation as “agriculture and politics” has marked half of his Rs 16-lakh income as belonging to his HUF.
Chandrasekhar Rao’s son and TRS Siricilla candidate KT Rama Rao recorded a Rs 44 lakh increase in income compared to 2014, when he had declared his total income as Rs 29 lakh. Fast forward to 2018, KTR the minister-cum-agriculturist’s wealth is Rs 74 lakh, of which Rs 59 lakh is agricultural income.
Another candidate who has both a HUF unit and also declared a portion of his money as agricultural income is TRS Sanathnagar candidate Talasani Srinivas Yadav. In his affidavit, the income marked under ‘self’ was Rs 43 lakh. Another Rs 40 lakh was categorised as belonging to HUF family unit, of which Rs 20 lakh was declared agricultural income.
What is a Hindu Undivided Family?
According to Cleartax, one can save taxes by creating a family unit and pooling in assets to form a Hindu Undivided Family (HUF). A HUF is taxed separately from its constituent members. Buddhists, Jains, and Sikhs can also form a HUF. The unit has its own Permanent Account Number and files tax returns independent of its members.