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    Agricultural Income

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    Vaishnavi C
    The document defines agricultural income and specifies the types of income considered agricultural income under section 2(1A) of the Income Tax Act. It also discusses how agricultural income is treated for tax purposes and the provisions around aggregation of agricultural and non-agricultural income to determine the applicable tax rate.

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    Agricultural Income

    Uploaded by

    Vaishnavi C
    13 views10 pages
    The document defines agricultural income and specifies the types of income considered agricultural income under section 2(1A) of the Income Tax Act. It also discusses how agricultural income is treated for tax purposes and the provisions around aggregation of agricultural and non-agricultural income to determine the applicable tax rate.

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    The document defines agricultural income and specifies the types of income considered agricultural income under section 2(1A) of the Income Tax Act. It also discusses how agricultural income is treated for tax purposes and the provisions around aggregation of agricultural and non-agricultural income to determine the applicable tax rate.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    13 views10 pages

    Agricultural Income

    Uploaded by

    Vaishnavi C
    The document defines agricultural income and specifies the types of income considered agricultural income under section 2(1A) of the Income Tax Act. It also discusses how agricultural income is treated for tax purposes and the provisions around aggregation of agricultural and non-agricultural income to determine the applicable tax rate.

    Copyright:

    © All Rights Reserved
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    AGRICULTURAL

    INCOME
    AGRICULTURAL INCOME-SEC.2(1A)
    Section 2(1A) defines agricultural income to mean
     Any rent or revenue derived from land, which is situated in
    India and is used for agricultural purposes;
     Any income derived from such land by agriculture or by the
    process employed to render the produce fit for the market
    or by sale of such produce by a cultivator or receiver of
    rent in kind
     Any income derived from farm building, provided the
    following conditions are satisfied:
    ➢ The building is on or in the immediate vicinity of the
    agricultural land;
    ➢ It is occupied by the cultivator or receiver of rent or
    revenue
    ➢ It is used as a dwelling house or store-house or out-house
    and
    ➢ The land is assessed to land revenue in India or it is not
    situated within the Specified area
    Specified area means:
     Any area which is comprised within the
    jurisdiction of a municipality or a
    cantonment board and which has a
    population of not less than 10,000
    according to the last preceding census of
    which the relevant population figures
    have been published before the first day
    or the previous year; or
     Any area within the distance specified
    hereunder measured aerially from the
    limits of such municipality or
    cantonment board:
     Explanation 2 to Section 2(1A): Income derived
    from any farm building or land appurtenant
    thereto arising from the use of such building or
    land for any purpose other than agriculture shall
    not be regarded as agricultural income.
     Explanation 3, Section 2(1A): Any income
    derived from saplings or seedlings grown in a
    nursery shall be deemed to be agricultural
    income.
     However, where an assessee is a trader of such
    saplings or seedlings, the same shall be taxed
    under the head ‘Profits and gains of business or
    profession’.
     Any gain derived on transfer of agricultural
    land will not be regarded as agricultural
    income.
     If the agricultural land is situated outside
    the specified area or notified area, it is not
    treated as a capital asset under section
    2(14) and therefore capital gains are not
    chargeable to tax.
     If, on the other hand, the agricultural land
    is situated within the specified area, it is
    regarded as a capital asset and taxable
    accordingly.
     where the assessee derives income from sale of
    tea grown and manufactured by him in India-
    60% of such income shall be regarded as the
    agricultural income of the assessee;
     where the assessee derives income from sale of
    centrifuged latex or cenex or latex based
    crepes (such as pale latex crepe) or brown
    crepes (such as estate brown crepe, re-milled
    crepe, smoked blanket crepe or flat bark
    crepe) or technically specified block rubbers
    manufactured or processed by him from rubber
    plants grown by him in India- 65% of such
    income shall be regarded as the agricultural
    income of the assessee;
     where the assessee derives income from sale of
    coffee grown and manufactured by him in
    India- 60% or 70% as the case may be, of such
    income shall be regarded as the agricultural
    income of the assessee.
    AGGREGATION OF
    AGRICULTURAL INCOME
     Agricultural income can only by taxed by the
    State Government and not by the Central
    Government – Schedule VII of the
    Constitution.
     Accordingly, agricultural income is declared
    to be exempt from income tax under Section
    10(1).
     However, agricultural income shall be
    included for determining the rate at which
    tax is payable on the non-agricultural income
    – this is provided in the Finance Act each
    year.
    Particulars Reference
    Agricultural income A
    Non-Agricultural B
    income
    Aggregation of A and B C

    Tax payable on C D
    Aggregation of A and E
    basic exemption limit
    Tax Payable on E F
    Net Tax Payable (D – F) G
     Ifthe non-agricultural income does not
    exceed the basic exemption limit, the
    agricultural income need not be aggregated.
     Aggregation of agricultural income is not
    required when the net agricultural income
    does not exceed Rs.5,000 during the relevant
    previous year.

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