Income Tax Return
How to show Agricultural income in Income Tax Return?
What is Agriculture Income?
Agricultural income earned by a taxpayer in India is exempt under Section 10(1) of the Income Tax Act, 1961. Agricultural income is defined under section 2(1A) of the Income-tax Act.
Section 2 (1A) of the Income Tax Act, 1961 defines “agricultural income” as an income under the following three sources:
(a) Any rent or revenue derived from land which is situated in India and is used for agricultural purposes:
(b) Any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce.
(c) Any income attributable to a farm house subject to satisfaction of certain conditions specified\ in this regard in section 2(1A). (d) Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.
Examples of Agricultural Income
The following are some of the examples of agricultural income:
Income derived from sale of replanted trees.
Income from sale of seeds.
Rent received for agricultural land.
Income from growing flowers and creepers.
Profits received from a partner from a firm engaged in agricultural produce or activities.
Interest on capital that a partner from a firm, engaged in agricultural operations, receives.
Examples of Non-Agricultural Income
The following are some of the examples of non-agricultural income:
Income from poultry farming.
Income from bee hiving.
Any dividend that an organization pays from its agriculture income.
Income from the sale of spontaneously grown trees.
Income from dairy farming.
Income from salt produced after the land has flooded with sea water.
Purchase of standing crop.
Royalty income from mines.
Income from butter and cheese making.
Receipts from TV serial shooting in farm house
Is Agricultural Income Taxable?
As per Section 10(1) of the Income Tax Act, 1961, agricultural income is exempted from taxation. The central government cannot levy tax on the agricultural income received.
However, agricultural income is considered for rate purposes while assessing the income tax liability if the following two conditions are met:
Net agricultural income is greater than Rs. 5,000/- for previous year.
• Total income, excluding net agricultural income, surpasses the basic exemption limit (Rs. 2,50,000 for individuals below 60 years of age and Rs. 3,00,000 for individuals above 60 years of age).
Calculation of Tax taking Agricultural Income into Account:
Tax calculation will involve the following steps:
Including the Agricultural Income – Considering B is the base income of the individual and A is the agricultural income, tax first needs to be computed on the amount of B+A. Let’s call this tax as T(B+A)
Adding the basic tax slab benefit – Depending upon changes in the Income Tax rules, the basic tax slab might change, but for clarity’s sake, let’s consider that as S. That needs to be added to the agricultural income and another tax is be calculated on the amount. Let’s call this tax as T(S+A)
Income Tax liability – This is the tax that is subject to deductions. Thus IT = T(B+A) – T(S+A)
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